Calculate net debt, net debt-to-EBITDA, enterprise value, and leverage health. Includes EBITDA sensitivity analysis and cash reserve impact table.
Net debt is total debt minus cash and cash equivalents — the true measure of a company's debt burden. While gross debt shows total obligations, net debt reveals how much debt remains after using available liquid assets, providing a more accurate picture of financial leverage and risk.
Net Debt/EBITDA is the most widely used leverage metric in corporate finance, M&A, and credit analysis. It shows how many years of earnings (before interest, taxes, depreciation, and amortization) would be needed to pay off net debt. Investment-grade companies typically maintain this ratio below 3.0x, while leveraged buyouts often push it above 5.0x.
This calculator computes net debt, multiple leverage ratios, and enterprise value (EV). The leverage gauge provides a visual health assessment, while sensitivity tables show how changes in EBITDA or cash reserves affect your leverage position. Essential for CFOs evaluating capital structure, investors screening for financial risk, and analysts performing due diligence.
Gross debt alone is misleading — a company with $50M debt and $40M cash is fundamentally different from one with $50M debt and $2M cash. This calculator computes the metrics that actually matter: net debt, leverage ratios, and enterprise value, with stress tests showing how robust the balance sheet really is.
Net Debt = Total Debt − Cash − Short-Term Investments. Net Debt/EBITDA = Net Debt / EBITDA. Enterprise Value = Market Cap + Net Debt. EV/EBITDA = Enterprise Value / EBITDA.
Result: Net Debt: $16M — Net Debt/EBITDA: 2.0x — EV: $56M — Health: Moderate
With $20M total debt and $4M in liquid assets, net debt is $16M. At $8M EBITDA, the Net Debt/EBITDA of 2.0x falls in the moderate range. A 30% EBITDA decline would push leverage to 2.86x — still manageable but approaching the 3.0x threshold.
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Net debt = Total debt (short-term + long-term borrowings) minus cash and cash equivalents minus short-term liquid investments. It represents the residual debt obligation that would remain if all liquid assets were used to pay down debt. A negative value means the company is in a net cash position.
It combines the true debt burden (net of cash) with a cash-flow proxy (EBITDA) that strips out non-cash charges and is comparable across capital structures, tax jurisdictions, and depreciation policies. Lenders, rating agencies, and investors all use this ratio as a primary assessment of credit quality.
Enterprise value (EV) = Market Cap + Net Debt. It represents the total value of the business (equity + debt claims). Adding net debt accounts for the fact that an acquirer must either assume or pay off the debt. EV allows comparison of companies regardless of how they are financed.
Typical loan covenants require Net Debt/EBITDA below 3.0-4.0x for investment-grade borrowers. Highly leveraged (junk-rated) companies may operate at 4.0-6.0x+. Private equity portfolio companies often start at 5.0-6.0x and are expected to delever below 3.0x within a few years.
Net Debt/EBITDA is a major input to credit ratings. At S&P, ratios below 2.0x typically support A-rated or higher. Between 2.0-3.0x supports BBB. Between 3.0-5.0x is speculative grade (BB/B). Above 5.0x may indicate CCC territory depending on the industry.
From a leverage standpoint, more cash is always better. From a shareholder value standpoint, excess cash earning low returns may be better deployed through dividends, buybacks, acquisitions, or debt repayment. The optimal cash level balances liquidity needs with return on capital.