Debt to EBITDA ratio - Revision history

imported>Doug Williamson: Typo correction.

2021-03-25T16:58:23Z

Typo correction.

← Older revision		Revision as of 16:58, 25 March 2021
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	''Credit risk - liquidity - financial ratios - documentation. ''		''Credit risk - liquidity - financial ratios - documentation. ''

	Debt to EBITDA is measure of an organisation's medium and longer term debt servicing capacity.		Debt to EBITDA is a measure of an organisation's medium and longer term debt servicing capacity.

	The lower the ratio, the greater the organisation's ability to service and repay its debt.		The lower the ratio, the greater the organisation's ability to service and repay its debt.
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	The ratio is calculated by dividing the organisation's debt by its EBITDA.		The ratio is calculated by dividing the organisation's debt by its EBITDA.

	Borrowing documentation may contain financial covenants, requiring the borrower to keep its debt to EBITDA ratio below the ~~convenanted~~ figure.		Borrowing documentation may contain financial covenants, requiring the borrower to keep its debt to EBITDA ratio below the covenanted figure.


	:<span style="color:#4B0082">''Covenant test''</span>		:<span style="color:#4B0082">'''Example: Covenant test'''</span>

	:G Group's net debt is EUR 350m and its EBITDA is EUR 100m.		:G Group's net debt is EUR 350m and its EBITDA is EUR 100m.
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	:G Group's maximum covenanted net debt to EBITDA ratio is 3 times.		:G Group's maximum covenanted net debt to EBITDA ratio is 3 times.

	:Is G Group within its financial ~~convenant~~?		:Is G Group within its financial covenant?

imported>Doug Williamson: Expand definition.

2021-03-20T21:25:36Z

Expand definition.

← Older revision		Revision as of 21:25, 20 March 2021
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	The lower the ratio, the greater the organisation's ability to service and repay its debt.		The lower the ratio, the greater the organisation's ability to service and repay its debt.

			Therefore, the lower its credit risk.

imported>Doug Williamson: Create page. Source: Debt to EBITDA page.

2021-03-20T19:44:44Z

Create page. Source: Debt to EBITDA page.

New page

''Credit risk - liquidity - financial ratios - documentation. ''

Debt to EBITDA is measure of an organisation's medium and longer term debt servicing capacity.

The lower the ratio, the greater the organisation's ability to service and repay its debt.

The ratio is calculated by dividing the organisation's debt by its EBITDA.

Borrowing documentation may contain financial covenants, requiring the borrower to keep its debt to EBITDA ratio below the convenanted figure.

:<span style="color:#4B0082">''Covenant test''</span>

:G Group's net debt is EUR 350m and its EBITDA is EUR 100m.

:G Group's maximum covenanted net debt to EBITDA ratio is 3 times.

:Is G Group within its financial convenant?

:Net debt to EBITDA ratio

: = EUR 350m / EUR 100m

: = 3.5 times.

:This is greater than the covenanted maximum of 3 times.

:G Group is in breach of its covenant.

== See also ==
* [[Breach of covenant]]
* [[Condition]]
* [[Contract]]
* [[Covenant]]
* [[Credit risk]]
* [[Cross acceleration]]
* [[Default]]
* [[EBITDA]]
* [[Event of default]]
* [[Financial covenant]]
* [[Financial ratio]]
* [[Frozen GAAP]]
* [[Headroom]]
* [[Interest cover]]
* [[Interest rate risk]]
* [[Liquidity]]
* [[Loan agreement]]
* [[Loan to value]]
* [[Representations and warranties]]
* [[Risk]]
* [[Solvency]]
* [[Tangible net worth]]
* [[Translation risk]]
* [[Waiver]]
* [[Working capital]]

[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]