What is ND/EBITDA?
The ratio of net debt (total debt minus cash) to EBITDA, showing how many years of earnings are needed to pay off debt.
Think of it like this
Like knowing how many years of your salary it would take to pay off your mortgage after using your savings.
Formula
Net Debt/EBITDA = (Total Debt - Cash) รท EBITDA- Total Debt: Short-term + long-term debt
- Cash: Cash and cash equivalents
- EBITDA: Earnings before interest, taxes, D&A
Why it matters
- Standard leverage metric for credit analysis
- Used in loan covenants
- Shows debt serviceability
- Rating agencies watch this closely
What's a good value?
< 1.0x
Conservative
Very low leverage
1.0-2.0x
Moderate
Healthy balance sheet
2.0-4.0x
Elevated
Meaningful leverage
> 4.0x
High
Significant debt burden
Real-world example
A company with $3B net debt and $1B EBITDA has 3.0x leverage - 3 years to pay off debt.
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