What is a leverage ratio?

A leverage ratio measures how indebted a company is. The most common version divides net interest-bearing debt by EBITDA, giving a multiple that indicates how many years of current earnings the debt represents. Lenders write covenants around it, so the figure governs borrowing capacity and refinancing terms, and for listed gambling groups it shapes how investors read the balance sheet.

How is the leverage ratio calculated?

The usual calculation is net debt, meaning interest-bearing borrowings less cash, divided by EBITDA. A company with 3 billion of net debt and 1 billion of EBITDA has leverage of 3.0x, meaning the debt equals three years of current earnings. Loan agreements define both inputs precisely, so the covenant figure can differ from the one a company highlights in its results.

Why can leverage rise when a company is repaying debt?

Leverage is a ratio with two moving parts. If EBITDA falls faster than debt is repaid, the multiple rises even though absolute debt is lower. That is why a cut to earnings guidance mechanically worsens leverage, often just as a business approaching a refinancing needs the figure to look its best. Acquisitions have a similar effect, because debt is drawn immediately while acquired earnings arrive over time.

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Leverage Ratio

Reviewed by iGaming Times editorial teamLast reviewed 24 September 2026

What is Leverage Ratio?

A measure of indebtedness, most often net interest-bearing debt divided by EBITDA, expressed as a multiple. It indicates how many years of current earnings the debt represents.

Key takeaways

Leverage ratio is usually net interest-bearing debt divided by EBITDA, expressed as a multiple of earnings.
Because it moves on both inputs, falling earnings can raise leverage even while debt is being repaid.
Gambling operators with predictable cash flow have sustained higher multiples, but regulatory or tax change quickly narrows that tolerance.

Why it matters

Leverage is the number lenders and covenants are written around, so it governs a great deal more than the balance sheet. It moves on both inputs, which is what makes it treacherous: a company can reduce absolute debt and still see leverage rise if earnings fall faster.

That matters most when guidance is cut. A downgrade to EBITDA guidance mechanically worsens the multiple, and it does so precisely when a business may be approaching a refinancing and needs the figure to look its best. Acquisitive companies face the same effect in reverse, since debt is drawn immediately while the acquired earnings arrive over time.

What counts as high depends on the sector and the stability of cash flow. Gambling operators with predictable revenue have historically sustained higher multiples than the wider market, though that tolerance narrows sharply when regulatory or tax change threatens the earnings side.

The bottom line

Leverage is a fraction with two moving parts, and the denominator is the one that surprises people. Falling earnings raise leverage even when debt is being repaid.

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Frequently asked questions

What is a leverage ratio?
A leverage ratio measures how indebted a company is. The most common version divides net interest-bearing debt by EBITDA, giving a multiple that indicates how many years of current earnings the debt represents. Lenders write covenants around it, so the figure governs borrowing capacity and refinancing terms, and for listed gambling groups it shapes how investors read the balance sheet.
How is the leverage ratio calculated?
The usual calculation is net debt, meaning interest-bearing borrowings less cash, divided by EBITDA. A company with 3 billion of net debt and 1 billion of EBITDA has leverage of 3.0x, meaning the debt equals three years of current earnings. Loan agreements define both inputs precisely, so the covenant figure can differ from the one a company highlights in its results.
Why can leverage rise when a company is repaying debt?
Leverage is a ratio with two moving parts. If EBITDA falls faster than debt is repaid, the multiple rises even though absolute debt is lower. That is why a cut to earnings guidance mechanically worsens leverage, often just as a business approaching a refinancing needs the figure to look its best. Acquisitions have a similar effect, because debt is drawn immediately while acquired earnings arrive over time.