Do you use "gross debt" or "net debt" for leverage ratio and WACC calculation?
Do you use "gross debt" or "net debt" for leverage ratio and WACC calculation? Would love to know the industry standard.
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I dont calculate WACC often but I would assume it's gross debt because that is what the company is paying interest on. The only time you see net debt is in enterprise value calculations and occassionaly covenant compliance certificates for the company (depending on how their covenants are structured). So for leverage ratio, you see it as both.
WACC: Gross Leverage: both; debt issued is thought of as gross multiples but credit agreements and covenants are on net basis
Leverage ratios are generally net in practice and every term sheet I've seen - they may have a cash cap on netting though
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