Debt to EBITDA (leverage)

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

Debt to EBITDA is total debt divided by a year's earnings before interest, tax, depreciation and amortisation: how many years of earnings the debt represents, and the usual way a lender states leverage. The number depends on two choices made before it is calculated — the date, because a year-end can fall after seasonal borrowing has been repaid, and the definition, because total, net and senior debt, and reported or adjusted EBITDA, each give a different answer for the same business. A desk reads the direction and the cause of a movement rather than the level alone: a ratio that jumps because a loan arrived ahead of the volume it was built to fund is a different file from one that climbs because earnings are falling, and the question under both is whether the debt can come down.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.