How it works
Gross debt and net debt are different measures. Net debt commonly subtracts selected cash balances from interest-bearing debt, but restricted cash or operating needs may limit availability. Read the company's definition. Total liabilities also include items other than borrowings, so they should not be silently substituted for interest-bearing debt.
Coverage is an earnings ratio, not a bank balance or complete repayment schedule. Principal due, leases, tax payments and investment requirements can consume cash beyond interest. Fixed and floating rates, currency mismatches and maturity concentration affect refinancing risk. The same ratio can describe very different financing structures.
Worked example
Assume a fictional company has debt of 300 million, unrestricted cash of 80 million, EBIT of 60 million and annual interest of 15 million. Simple net debt is 220 million and coverage is 4. If EBIT falls to 30 million while interest rises to 20 million, coverage becomes 1.5. A 100 million principal maturity is not included in either coverage calculation.
Interpretation and limits
There is no universal safe cutoff across industries and cycles. Exceptional gains can inflate EBIT; negative earnings make normal interpretations difficult. EBITDA-based coverage is a different definition and must be labeled. Past coverage does not guarantee refinancing access or payment during a future downturn.
Chart practice
Read the dated debt footnote and maturity table separately. Mark the publication date and examine available closed weekly bars around it. Student Wyckoff Pro analyzes charts; a rising share price cannot verify liquidity, covenant compliance or the company's ability to repay debt.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Continue with analysis of available closed daily, weekly and monthly bars.
Open the first-chart instructions ↗