Indebtedness
The aggregate of a company’s financial liabilities: bank loans, bonds, finance leases, and intra-group debt. The debt ratio — debt-to-equity or net debt divided by EBITDA — measures the sustainability of the financial structure.
In practice
A net debt / EBITDA ratio below 3 is generally considered healthy for an SME. Above 5, the structure is stretched and leaves little buffer for any economic shock. In leveraged buyouts, ratios of 6 to 8 times are common but require highly predictable cash generation. The cost of debt has risen sharply since 2022: floating-rate or refinanced loans from 2023 carry margins significantly higher than pre-2020 vintage debt.