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Leverage Ratio Calculator

Work out leverage ratio instantly with clear inputs, formula shown and shareable results.

About Leverage Ratio Calculator

Lenders test leverage two ways: debt to EBITDA, a stock measure of how many years of earnings the debt represents, and interest cover, a flow measure of whether earnings comfortably service it. Most mid-market covenants sit around 3.0-3.5x leverage with cover above 3.0x.

Formulas

Leverage

Debt / EBITDA = Total debt / EBITDA

Interest cover

Cover = EBITDA / Interest expense

Worked example

With the default values below, Leverage Ratio Calculator returns Debt / EBITDA of 3.20. Change any input above and every figure here is recalculated in your browser.

Inputs used

Total debt including leases
8,000,000
EBITDA
2,500,000
Annual interest expense
560,000
Total assets
18,000,000

Results

Debt / EBITDA
3.20
Interest cover (EBITDA / interest)
4.46
Asset leverage multiple
1.80
Covenant assessment
Within typical covenant range

Step by step

  1. 1Values used
  2. 2Leverage
  3. 3Interest cover
  4. 4Debt / EBITDA= 3.20
  5. 5Interest cover (EBITDA / interest)= 4.46
  6. 6Asset leverage multiple= 1.80
  7. 7Covenant assessment= Within typical covenant range

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation or tax into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Which matters more to a lender?

Interest cover in the short run, because it is about paying the coupon. Leverage matters at refinancing, when the whole balance has to be rolled.

Should EBITDA be adjusted?

Facility agreements define adjusted EBITDA precisely. Use that definition for covenant testing, not the statutory figure.

Related Calculators

Leverage Ratio Calculator – Calculate Debt / EBITDA