8 February 2018

Net Debt/EBITDA

= (Debt-cash)/Earnings before interest, tax, depreciation and amortisation


Provides a measure of strength of the balance sheet. Just as someone earning £100,000 per year would be more comfortable with a £500,000 mortgage than someone on £20,000, a business with a small amount of debt as a proportion of earnings would be more comfortable than vice versa.


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