Leverage and Debt Ratios Calculator (Debt/Equity, Interest Coverage, Net Debt/EBITDA)
Calculates debt-to-equity, debt ratio, equity ratio, interest coverage and net debt/EBITDA to measure a company's financial leverage.
Things to keep in mind:
- A result of 0 for interest coverage or net debt/EBITDA means the denominator is zero or negative, not that there is no risk.
- Classification of financial versus trade debt depends on your input; it is not modelled.
- Appropriate levels vary by industry; the tool suggests no thresholds.
- For information only; use the exact definitions in your loan covenants.
Calculator
Result
Enter the values and press Calculate to see the result here.
About this tool
Leverage ratios show how much of the business is financed with debt and how comfortably that debt can be serviced. From balance sheet items (total liabilities, equity) and income statement items (EBIT, interest expense, depreciation), this tool calculates debt-to-equity, debt ratio, equity ratio, interest coverage, EBITDA and net debt/EBITDA in one go.
Formulas
- Total assets = Total liabilities + Equity
- Debt-to-equity = Total liabilities / Equity
- Debt ratio (%) = Total liabilities / Total assets × 100
- Equity ratio (%) = Equity / Total assets × 100
- Interest coverage = EBIT / Interest expense (shown as 0 if interest expense is 0)
- EBITDA = EBIT + Depreciation and amortisation
- Net debt = Financial debt − Cash
- Net debt / EBITDA = Net debt / EBITDA (shown as 0 if EBITDA is zero or negative)
All results are rounded to 2 decimals, half up (HALF_UP). Equity must be greater than zero.
Example 1: Liabilities 600,000 TRY, equity 400,000 TRY, EBIT 150,000 TRY, interest 50,000 TRY, depreciation 50,000 TRY, financial debt 450,000 TRY and cash 50,000 TRY give total assets 1,000,000.00 TRY, debt-to-equity 1.50, debt ratio 60.00 %, equity ratio 40.00 %, interest coverage 3.00, EBITDA 200,000.00 TRY, net debt 400,000.00 TRY and net debt/EBITDA 2.00.
Example 2 (high debt): Liabilities 900,000 TRY, equity 100,000 TRY, EBIT −20,000 TRY, interest 40,000 TRY, depreciation 30,000 TRY, financial debt 500,000 TRY and cash 10,000 TRY give debt-to-equity 9.00, debt ratio 90.00 %, interest coverage −0.50, EBITDA 10,000.00 TRY, net debt 490,000.00 TRY and net debt/EBITDA 49.00.
How to read the result: The higher debt-to-equity and the debt ratio are, the more the business relies on borrowed funds; the equity ratio is the complement and adds up to 100 % with the debt ratio. Interest coverage shows how many times operating profit covers interest; below 1 or negative means operating profit does not cover interest. Net debt/EBITDA is a rough indicator of how many years of EBITDA would be needed to clear net debt; a negative net debt means a net cash position. A 0 for interest coverage or net debt/EBITDA means "not computable", not "no risk". Suitable levels vary by industry. To see all financial ratios together, you can also use the Financial Health Analysis tool.
How to use
- Enter total liabilities and equity.
- Enter EBIT, interest expense and depreciation.
- Optionally enter financial debt and cash (for net debt).
- Press Calculate.
Notes
Total assets are taken as liabilities plus equity (balance sheet identity). Ratios are rounded HALF_UP to 2 decimals. A 0 result for interest coverage or net debt/EBITDA means "not computable".
Sources
Frequently asked questions
There is no single answer; capital-intensive industries run higher ratios than service businesses. Below 1 is usually considered conservative. For example, 900,000 TRY of debt against 100,000 TRY of equity gives 9.00, which means high leverage.
It shows how many times operating profit (EBIT) covers interest expense. With EBIT of 150,000 TRY and interest of 50,000 TRY the ratio is 3.00. Below 1 or negative means operating profit does not cover interest.
It is a rough measure of how many years of earnings are needed to repay debt, and is common in bank covenants. Net debt of 400,000 TRY and EBITDA of 200,000 TRY give a ratio of 2.00.
No. If interest expense is 0 (interest coverage) or EBITDA is zero or negative (net debt/EBITDA), the tool cannot compute the ratio and shows 0. This means "not computable", not that there is no risk.
Because total assets are defined here as liabilities plus equity (balance sheet identity). For example, a 60 % debt ratio corresponds to a 40 % equity ratio.
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