Debt to EBITDA ratio counts as Total debt divided by EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization. This ratio is used as an indicator to predict the overall profitability of a business, company or firm before taxes and other accounting items.
Total debt / EBITDA
It shows if a company is able to pay its debts and obligations, if needed, with its earnings. Sometimes EBITDA is considered a more accurate indicator of profit from a company’s activities because it calculates earnings before any other accounting items are factored in. Therefore the Debt to EBITDA Ratio can provide a clearer understanding of the available funds to pay off debt.