Fundamental Glossary / Debt & Financial Stability
Net Debt-to-EBITDA
Net debt divided by EBITDA. A rough count of how many years of current EBITDA would repay the net borrowings.
Formula
Net debt / EBITDA. Use a full year of EBITDA, not a single quarter times four, unless the business is even through the year.
What it means
Credit analysts use this multiple because it relates the stock of net debt to a flow of operating profit before capital spending. A ratio of 3 means net debt is three times annual EBITDA.
Typical comfort zones differ by industry. Above 4 or 5 often draws covenant attention in ordinary industrial companies. Infrastructure concessions live with higher ratios by design.
How to read it
A falling ratio from rising EBITDA is healthier than the same fall from a one-time cash inflow. Track both the numerator and the denominator.
What to watch
EBITDA is not cash available for debt service. Tax, interest, working capital, and maintenance capex all come out first. A low multiple on peak-cycle EBITDA will look worse at mid-cycle.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.