Debt to EBIT formula
\[ \dfrac{\text{Financial debt}}{\text{EBIT}} \]
Terms
- EBIT, period total: Earnings before interest and taxes: operating profit plus other income and expenses such as investment income and currency results. It is the profit available to pay lenders, the state and owners.
- Financial debt, closing balance: Interest-bearing borrowings, short- and long-term: bank loans, overdrafts, bonds, lease liabilities.
Result
Debt to EBIT is a ratio. Lower is better.
Target
There is no general target; compare with the company’s own history and with peers in the same industry.
Debt to EBIT pitfalls
- For a period shorter than a year, annualise EBIT first, or the ratio overstates the payback time.
- Lenders more often use net debt (debt minus cash) over EBITDA; this version is stricter.
Debt to EBIT in Business Central
Cost of sales (period total)
- Category Cost of Goods Sold (26) and every category below it
- Plus 3 accounts assigned directly: 50310 Project Costs, 50320 Project Cost Applied, 50410 Purchase Variance, Retail
10 posting accounts in total.
The full account list is on the Cost of sales page.
Financial debt (closing balance)
- Plus 5 accounts assigned directly: 21100 Bonds and Debenture Loans, 21200 Convertibles Loans, 21400 Bank overdraft Facilities, 22500 Bank overdraft short-term, 25400 Current Loans
5 posting accounts in total.
The full account list is on the Financial debt page.
Operating expenses (period total)
- Category Expense (31) and every category below it
- Plus 3 accounts assigned directly: 60410 Utilities Expense - Power Plant, 66200 Depreciation, Equipment, 67400 Miscellaneous
- Except category Interest Expense, account 91000 Currency Losses
102 posting accounts in total.
The full account list is on the Operating expenses page.
Other income and expenses, net (period total)
- Category Income, Interest (24) and every category below it
- Plus 6 accounts assigned directly: 40310 Income from securities, 40320 Management Fee Revenue, 40380 Currency Gains, 40390 Other Incidental Revenue, 81200 Gains and Losses, 91000 Currency Losses
7 posting accounts in total.
The full account list is on the Other income and expenses, net page.
Revenue (period total)
- Category Income, Services (19) and every category below it
- Category Income, Product Sales (20) and every category below it
- Category Income, Jobs (21) and every category below it
- Category Sales Discounts (22) and every category below it
- Category Sales Returns & Allowances (23) and every category below it
- Category Job Sales Contra (25) and every category below it
- Plus 8 accounts assigned directly: 40410 Job Sales, 40420 Job Sales Applied, 40430 Sales of Service Contracts, 40440 Sales of Service Work, 40910 Discounts and Allowances, 40920 Invoice Rounding, 40930 Payment Tolerance, 40940 Sales Returns
13 posting accounts in total.
The full account list is on the Revenue page.
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