Leverage

Leverage measures the proportion of debt in the company's capital structure. The most-cited variant is net debt divided by EBITDA, which expresses leverage in 'years of EBITDA needed to retire net debt' and is the standard framing in credit analysis. Investment-grade balance sheets typically operate at 1.5–3.0x net leverage; high-yield issuers run 4.0–6.0x; distressed names exceed 6.0x. Leverage is also expressed as debt-to-equity (book leverage, useful for financials), debt-to-capital (cleaner cross-firm comparison), and interest coverage (EBIT or EBITDA divided by interest expense, the survivability lens during stress). We track leverage trends and trajectory: a stable 2.5x leverage on a growing EBITDA base is materially different from a stable 2.5x on a flat EBITDA base, even though the ratio is identical. The latter implies passive deleveraging; the former implies active capital-allocation discipline. Rising leverage during M&A waves is a classic late-cycle signal that often precedes credit-spread widening.