Fundamentals

Debt-to-EBITDA

Debt-to-EBITDA measures a company's ability to pay off debt using operating earnings. It shows roughly how many years of EBITDA would be needed to pay all debt. Below 3x is generally conservative; above 4-5x is considered high leverage.

Formula

Debt/EBITDA = Total Debt / EBITDA

Related Terms

Debt-to-Equity Ratio (D/E)Interest Coverage Ratio

Learn More

This term is covered in the following lessons:

Interest Coverage and Solvency