Technicals Stability Returns

Understanding Debt to EBITDA Ratio

The Debt to EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) Ratio is a solvency metric that measures the company's ability to meet its debt by EBITDA.

Debt to EBITDA ratio of 3 is acceptable. High ratios indicate that the company is more loaded with debts compared to its EBITDA. And low ratio indicates that the company is financially healthy and the EBITDA of the company is higher than its debt, and the company can meet debt obligations.

The formula for calculating Debt to EBITDA Ratio


Example: For the financial year Aurobindo Pharma Limited reported total debt as Rs. 5182.99 Cr. and EBITDA as Rs. 8473.47 Cr.
The value as per the formula is calculated as (Total Debt / EBITDA) is calculated as (5182.99 / 8473.47) = 0.61

Range Indicator of Debt to EBITDA Ratio

Range Indicator Comments Screener at TSR
Below 1 Strong Bullish Debt Free NA
1 to 2 Bullish Almost Debt Free NA
2 to 3 Mild Bullish Low Debts NA
3 to 4 Neutral Stable Debts NA
4 to 6 Mild Bearish Debt Burden NA
6 to 8 Bearish High Debt Burden NA
Above 8 Strong Bearish Extremely High Debt Burden NA