Leverage ratios link a company’s debt holdings to a particular cash flow indicator, most frequently EBITDA. The financing climate and the industry will have a significant impact on the leverage ratio parameters; nonetheless, the total leverage ratio in an LBO range from 4.0x to 6.0x, with the senior debt ratio normally being around 3.0x. Total Debt / EBITDA Senior Debt / EBITDA
Net Debt / EBITDA Interest coverage ratios look at a company’s ability to use its cash flows to fulfil its interest obligations.
As a general rule, it is preferable to have an interest coverage ratio that is larger than 2.0x.
