What exactly should I include in “Total debt” for Net Debt / EBITDA?

Use interest-bearing debt: short-term borrowings + current portion of long-term debt + long-term debt (and include finance leases if you treat them as debt). Exclude operating items like accounts payable unless your covenant definition explicitly treats them as debt.

Should I subtract all cash, or only “cash & cash equivalents” (and what about restricted cash)?

Subtract only cash and cash equivalents you can actually use to repay debt. If cash is restricted (trapped in a subsidiary, escrow, regulatory reserves), don’t net it unless your definition/covenant allows it.

What if EBITDA is negative (or very small) — is the ratio still usable?

Not really. A negative/near-zero EBITDA makes the multiple misleading or meaningless; treat it as “not interpretable” and switch to liquidity and cash-flow metrics (cash runway, interest coverage, [link url="free-cash-flow-calculator"]FCF[/link], etc.) for decision-making.

What’s a “good” Net Debt / EBITDA level for covenants or lending decisions?

It depends on industry stability and lender/rating adjustments, but as a rule of thumb: ~0–2x is often viewed as low, ~2–4x moderate, and >4x elevated—then validate against your sector comps and your actual covenant definition.

Net Debt to EBITDA Calculator (Net Leverage Ratio)

Net Debt to EBITDA Calculator

Calculate Net Debt to EBITDA (Net Leverage): (Total Debt − Cash & Equivalents) ÷ EBITDA. Includes clean tooltips, practical scenarios, and a concise "What It Means" panel.

Total debt

Cash & cash equivalents

EBITDA (TTM)

Results

Net debt / EBITDA
Net debt $
Net cash $

What is Net Debt to EBITDA?

Net Debt to EBITDA is a leverage ratio that compares a company’s net interest-bearing debt (debt minus cash) to its trailing EBITDA.

It’s used in credit analysis and M&A to gauge debt burden, refinancing risk, and how much operating earnings can support the capital structure.

Common use cases: covenant testing, debt capacity planning, capital allocation, and comparing leverage across peers (often alongside EV/EBITDA and interest coverage).

Formula

Example

Inputs (TTM / LTM):

Total debt = $1,000,000,000
Cash & cash equivalents = $200,000,000
EBITDA (TTM) = $400,000,000

Results:

Net Debt = $1,000,000,000 − $200,000,000 = $800,000,000
Net Debt / EBITDA = $800,000,000 ÷ $400,000,000 = 2.00x

Interpretation (rule-of-thumb): 2.00x often reads as moderate net leverage; stress-test EBITDA downside for covenant headroom and debt service resilience.

How to Use the Net Debt to EBITDA Calculator

Enter total debt, cash, and trailing-twelve-month EBITDA to instantly calculate net debt and the Net Debt/EBITDA leverage multiple.

Enter Total Debt
- Add the company’s interest-bearing debt (short-term + long-term; include lease debt if applicable).
Enter Cash & Cash Equivalents
- Use cash and near-cash investments you can readily access (exclude restricted cash unless it’s truly available).
Enter EBITDA (TTM)
- - Input trailing twelve months EBITDA to match how leverage is commonly assessed.
formula: Net debt = Total debt − Cash & cash equivalents; Net Debt / EBITDA = Net debt ÷ EBITDA (TTM)
Review Results
- The calculator outputs both Net debt (a $ amount) and Net Debt / EBITDA (an “x” multiple).
Stress-test with Scenarios (optional)
- Use the Scenarios control to model downside EBITDA or different cash/debt assumptions and see how fast leverage moves.

Frequently Asked Questions

Use interest-bearing debt: short-term borrowings + current portion of long-term debt + long-term debt (and include finance leases if you treat them as debt). Exclude operating items like accounts payable unless your covenant definition explicitly treats them as debt.
Subtract only cash and cash equivalents you can actually use to repay debt. If cash is restricted (trapped in a subsidiary, escrow, regulatory reserves), don’t net it unless your definition/covenant allows it.
Not really. A negative/near-zero EBITDA makes the multiple misleading or meaningless; treat it as “not interpretable” and switch to liquidity and cash-flow metrics (cash runway, interest coverage, FCF, etc.) for decision-making.
It depends on industry stability and lender/rating adjustments, but as a rule of thumb: ~0–2x is often viewed as low, ~2–4x moderate, and >4x elevated—then validate against your sector comps and your actual covenant definition.

Methodology & Sources

Bibliography

Aswath Damodaran (2023). Data Update 6 for 2023: The Upside and Downside of Debt — NYU Stern School of Business https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate6for2023.pdf
Accessed 2025-12-18
Katharine V. Macy (2021). Librarian’s Guide to Understanding Scholarly Publisher Financial Data — IUPUI University Library (Indiana University–Purdue University Indianapolis) https://scholarworks.indianapolis.iu.edu/bitstreams/9fa94823-1511-4c25-ade1-f39405816ae0/download
Accessed 2025-12-18

Net Debt to EBITDA Calculator

Results

What It Means

What is Net Debt to EBITDA?

Formula

Example

How to Use the Net Debt to EBITDA Calculator

Enter Total Debt

Enter Cash & Cash Equivalents

Enter EBITDA (TTM)

Review Results

Stress-test with Scenarios (optional)

Frequently Asked Questions

Methodology & Sources

Bibliography

Other Calculators in Corporate Finance & Analysis

Net Debt Calculator