This is an ultimate complete guide on how to calculate Net Debt to EBITDA Ratio with detailed analysis, interpretation, and example. You will learn how to use its formula to assess an organization's debt repayment ability.
The net debt to EBITDA ratio is essentially how many years it would take a company to pay back all its debts if its net liabilities and EBITDA are held constant.
For your information, EBITDA stands for Earnings before Interest, Taxes, Depreciation, and Amortization.
The net debt to EBITDA is a key profitability ratio for those who want to analyse the creditworthiness of a business.
The higher the ratio, the more concerned investors would be that the company is instead, leveraged too heavily and subsequently might face trouble paying off its debts.[Click to continue]
This is a complete guide on how to calculate Debt Ratio with detailed interpretation, analysis, and example. You will learn how to use its formula to assess a company's debt repayment capacity.
The debt ratio, also referred to as the total debt to total asset ratio, allows you to calculate what portion of a company’s assets has been financed by debt.
The value of this ratio will provide you with information about the solvency of a particular business, and how capable it is of meeting its long-term financial obligations.
Generally speaking, the higher a firm’s total debt ratio value, the riskier its financial structure, since the majority of its assets will have been paid for with borrowed funds.
There’s always the risk that a company in this situation will eventually find itself unable to service its debt load.
The closer the ratio value is to 0%, the more stable and economically conservative a company is, with a greater portion of its assets having been purchased with investor equity.[Click to continue]
This is a detailed guide on how to calculate Cash Flow Coverage Ratio with in-depth analysis, example, and interpretation. You will learn how to utilize this ratio’s formula to assess a firm's debt settlement ability.
Similar to the fixed charge coverage ratio, the cash flow coverage ratio is a simple calculation that you can use to assess a company’s ability to pay all of its interest and fixed expenses.
This ratio focuses primarily on the capacity of a firm's cash flow to cover all non-expense items, which contain payments for dividends, capital expenditures (CAPEX), and the principal on debt.
The CF coverage ratio is particularly useful when evaluating businesses that are quickly expanding their fixed assets bases or businesses with heavy debt burdens.
In this article, we’ll look into how to calculate this ratio and how to use it as a tool to measure a company’s debt repayment capacity.[Click to continue]
This is a complete guide on how to calculate Debt Service Coverage (DSCR) ratio with thorough interpretation, analysis, and example. You will learn how to use its formula to examine a business debt settlement capacity.
When you want to investigate the solvency of a company you’re considering as an investment, that company’s ability to support its debt payments becomes a crucial consideration.
The debt service coverage ratio is one of the calculations you can use to measure a firm’s debt-paying ability, by comparing its net earnings with the amount of its loan and interest payments.
In short, this financial ratio allows you to determine whether the business you’re considering is generating enough income to cover its debts.
If a company’s DSCR is less than 1, there’s a strong likelihood that the firm will be unable to meet all of its loan obligations.
But when the ratio value is greater than 1, it tells you that cash flow from the company’s net income is more than sufficient to service the firm’s current debt load.
Because the debt service ratio looks at all of the costs associated with a firm’s outstanding debt, rather than just at the outstanding amount of the debt itself, it provides you with information about a company’s debt-servicing ability that’s much more precise than what you could glean from its debt ratio alone.[Click to continue]