This Net Debt/EBITDA Ratio template will show how to calculate the interest coverage ratio using the formula: (Short Term Debt + Long Term Debt – Cash and Cash Equivalent) / EBITDA.
Here is a screenshot of the template:
Download the Free Template
Enter your name and email in the form below and download the free template now!
What is the Net Debt to EBITDA Ratio?
The net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio measures financial leverage and a company’s ability to pay off its debt. Essentially, the net debt to EBITDA ratio (debt/EBITDA) gives an indication as to how long a company would need to operate at its current level to pay off all its debt. The ratio is commonly used by credit rating agencies to determine the probability of a company defaulting on its debt.
A low ratio of net debt/EBITDA is preferred by analysts as it indicates that the company is not excessively indebted and should be able to repay its debt obligations. Conversely, if the net debt/EBITDA is high, it indicates that a company is heavily burdened with debt. That situation would lower the company’s credit rating and investors would, therefore, require higher yields on bonds to compensate for the higher default risk.
More Free Templates
For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentation and Word document templates.
Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
Additional Questions & Answers
CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
Take your learning and productivity to the next level with our Premium Templates.
Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI's full course catalog and accredited Certification Programs.
Already have a Self-Study or Full-Immersion membership? Log in
Access Exclusive Templates
Gain unlimited access to more than 250 productivity Templates, CFI's full course catalog and accredited Certification Programs, hundreds of resources, expert reviews and support, the chance to work with real-world finance and research tools, and more.