Why people use EBIT / EBITDA in leverage ratios?
I always ask myself why EBITDA is so heavily used over Free-Cash-Flow in general, but in terms of debt ratios it particularly surprises me.
Why would I calculate my debt ratios not with FCF? Like my interest coverage ratio using EBITDA/EBIT can be fine but if I have huge CapEx / non operating outflows I am still screwed not using FCF as a metric.
Correct you also look at Debt / EBITDA - Capex and fixed charge coverage ratio. There are many ways to manipulate leverage ratios to look better than they are
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