Learn / Fundamentals / Financial health / Net Debt / EBITDA
Net Debt / EBITDA = (Total Debt − Cash) ÷ EBITDA
This ratio asks how heavy the net debt load is relative to operating profit. Lower usually means lighter. Higher means the debt pile is bigger compared to the engine.
01 Feel it first
Slide total debt, cash, and EBITDA. Tap Fortress, Normal, or Stretched presets. Watch net debt and the live multiple update.
02 Break the intuition
Both companies owe $4 billion. Reveal how a huge cash pile changes net debt and the multiple.
03 Build the number
Tap chips to build net debt, then divide by EBITDA. That is the leverage multiple lenders and buyers watch.
Net debt is $3B ($4B debt − $1B cash). Divided by $1B EBITDA, leverage is 3×. At today's pace it would take about three years of operating profit to clear the net debt pile.
04 Scrub the scale
Drag the leverage slider from 0× to 8×. See how lenders and buyers label the bands.
At 3.0×, leverage reads Normal. Compare inside the same sector before you call it safe or scary.
05 Two flavors
Cash on hand reduces what you really owe. Gross debt alone can overstate the load.
06 The catch
Utilities often run higher. Software often runs lower. Banks are a special case.
07 Check yourself
08 Where it breaks
Operating profit before interest and wear-and-tear can look fine while free cash flow struggles. Check whether cash actually arrives.
Management often adds back costs it calls one-time. Those items sometimes keep showing up. Read what was left out.
Cash in a foreign subsidiary or restricted account may not pay down parent debt. Net debt can look lighter than reality.
A firm can look OK on net debt / EBITDA while struggling to cover interest. Pair it with interest coverage.
Open any ticker for net debt, EBITDA, and peer multiples — then screen for stretched balance sheets.
Gross debt is $4B. Cash of $1B leaves $3B of net debt. Divided by $1B EBITDA, leverage is 3.0×. At this pace it would take about that many years of operating profit to clear the net debt pile.