Whilst financial markets have been through a lot of changes in recent years (banks in particular) and there is more to come, it is good to know that some things never change. One lending covenant, or financial covenant, which has regained favour in recent years is the old question “how much debt should I have relative to my cash flow?”. This is known as Gross Leverage Ratio. Gross Leverage Ratio formula Total Debt ÷ Rolling 12 months EBITDA Total debt includes all external/bank term debt facilities. EBITDA = earnings before interest, tax, depreciation and amortisation. As a rule of thumb,...
