Debt/EBITDA

AAA

DEFINITION of 'Debt/EBITDA'

A measure of a company's ability to pay off its incurred debt. This ratio gives the investor the approximate amount of time that would be needed to pay off all debt, ignoring the factors of interest, taxes, depreciation and amortization.

Debt/EBITDA

INVESTOPEDIA EXPLAINS 'Debt/EBITDA'

Debt/EBITDA is a common metric used by credit rating agencies to assess the probability of defaulting on issued debt. A high debt/EBITDA ratio suggests that a firm may not be able to service their debt in an appropriate manner and can result in a lowered credit rating. Conversely, a low ratio can suggest that the firm may want take on more debt if needed and it often warrants a relatively high credit rating.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Earnings Before Interest, Taxes, ...

    An indicator of a company's financial performance which is calculated ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Debt/Equity Ratio

    A measure of a company's financial leverage calculated by dividing ...
  5. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  6. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
Related Articles
  1. A Clear Look At EBITDA
    Markets

    A Clear Look At EBITDA

  2. EBITDA: Challenging The Calculation
    Options & Futures

    EBITDA: Challenging The Calculation

  3. Understanding Economic Value Added
    Markets

    Understanding Economic Value Added

  4. When is revenue recognized under accrual ...
    Fundamental Analysis

    When is revenue recognized under accrual ...

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center