Solvency Ratios Calculator

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Solvency or leverage ratios assess a company’s ability to meet its long-term obligations and evaluate the extent to which it relies on debt financing relative to equity. More info →

Input

Enter financial information to calculate solvency ratios.

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How This Calculator Works

Solvency ratios look at the long term: how much the company has borrowed compared with what it owns, and whether its earnings comfortably cover its interest and loan repayments. The calculator works out eight figures from your balance sheet and income numbers.

The Formulas

Net Debt = Debt − Cash · Debt-to-Equity = Debt ÷ Equity
Debt-to-Asset = Debt ÷ Assets · Asset-to-Equity = Assets ÷ Equity
Interest Coverage = PBIT ÷ Interest · DSCR = EBITDA ÷ (Interest + Principal)
Net Leverage = Net Debt ÷ EBITDA · Gross Leverage = Debt ÷ EBITDA

If a divisor is zero, that ratio is shown as 0.

What Each Input Does

EBITDA / PBIT: Operating earnings before (and after) depreciation, used for the coverage and leverage ratios.
Interest Expense / Annual Principal Repayment: A year's interest and loan repayments, used for interest coverage and DSCR.
Cash & Cash Equivalents: Subtracted from debt to get net debt.
Total Assets / Total Debt / Total Equity: Balance sheet figures for the debt and asset ratios.

Step by Step

Net debt is worked out first.
Each ratio is calculated from the formulas above.
All ratios are rounded to 2 decimals.
The summary is based on the debt-to-equity ratio.

Reading the Result

Debt-to-equity below 1 – conservative, low leverage.

1 to below 2 – moderate leverage.

2 or more – high leverage and higher financial risk.

Quick Example

Assets 2,000,000, debt 800,000, equity 1,000,000, cash 200,000, EBITDA 400,000, PBIT 300,000, interest 60,000, principal 100,000. Net debt 600,000, debt-to-equity 0.80, debt-to-asset 0.40, asset-to-equity 2.00, interest coverage 5.00, DSCR 2.50, net leverage 1.50, gross leverage 2.00.