What this article covers: A reference for BrizoConsol's built-in Leverage & Risk KPIs — the formula behind each KPI and how to interpret the result. For a full list of all KPI categories, see Built-in KPIs Overview.
Leverage & Risk KPIs measure the balance between debt and equity financing and the business's ability to service its obligations. They help identify financial risk exposure, capital structure strength, and whether the group has sufficient earnings headroom to meet lender requirements — at both entity and consolidated group level.
🛈 How these KPIs are calculated: Leverage KPIs use closing balance sheet figures at the reporting date. They rely on accurate classification of debt, equity, and asset accounts — misclassified accounts will produce incorrect results. Higher debt levels increase financial risk but may also enhance return on equity potential. These KPIs are most useful when compared across subsidiaries for risk benchmarking, or tracked against lender covenant thresholds.
KPI Reference
Debt to Equity Ratio
Total Liabilities ÷ Total Equity
The proportion of funding coming from creditors versus shareholders. A higher ratio means the business is more reliant on debt financing. There is no universal "ideal" level — acceptable ratios vary significantly by industry. Capital-intensive sectors (property, infrastructure) typically carry higher ratios than asset-light businesses. Most useful when tracked over time or compared between entities in the group.
Debt Ratio
Total Liabilities ÷ Total Assets
The share of total assets financed by debt. A ratio below 0.5 (50%) generally indicates that more than half of the asset base is funded by equity — considered conservative. A ratio above 0.7 (70%) may signal elevated financial risk, though context matters. Use alongside the Equity Ratio for a complete capital structure picture.
Equity Ratio
Total Equity ÷ Total Assets
The complement of the Debt Ratio — reflects how much of the asset base is funded by shareholders' equity. A higher equity ratio indicates a more conservatively financed business with lower financial risk. Note that Debt Ratio + Equity Ratio = 1.0 (100%), so they always move inversely.
Interest Coverage Ratio
EBIT ÷ Interest Expense
How many times operating earnings cover interest payments. A higher ratio indicates greater capacity to service debt. A ratio below 1.5× means most operating earnings are consumed by interest — a warning signal. Many lenders include a minimum interest coverage covenant in loan agreements.
Result
Interpretation
> 3×
Comfortable — strong earnings buffer above interest obligations
1.5× – 3×
Adequate — monitor closely, limited headroom
< 1.5×
Elevated risk — majority of earnings consumed by interest
Net Debt to EBITDA
(Total Borrowings − Cash) ÷ EBITDA
The number of years of EBITDA required to repay net debt — the most commonly used leverage metric by lenders and private equity. Lower ratios imply stronger financial flexibility. Many lenders set a maximum Net Debt to EBITDA covenant as a condition of borrowing.
Result
General guidance
< 2×
Conservative leverage — strong repayment capacity
2× – 4×
Moderate leverage — typical for many funded businesses
> 4×
Elevated leverage — may breach lender covenants depending on terms
Gearing Ratio
Net Debt ÷ (Net Debt + Equity)
The leverage position expressed as a proportion of total capital employed (debt + equity). A gearing ratio of 40% means 40% of the capital base is funded by net debt. A lower ratio indicates a more conservatively structured business. Often used by boards and lenders as a simple headline leverage metric — particularly common in the UK and Australia.
Where to Use These KPIs
Where
How
Pulse — Key Metrics
Add Net Debt to EBITDA and Interest Coverage to Key Metrics for real-time covenant headroom monitoring
Health Scores
Weight Interest Coverage and Gearing Ratio in the Pulse health score to reflect financial risk in your overall health assessment
Custom Reports
Build a debt management report using a rolling 12-month KPI row for Net Debt to EBITDA alongside balance sheet accounts
Board & Lender Reports
Include Gearing Ratio, Net Debt to EBITDA, and Interest Coverage in Insight Packages for board packs and lender reporting
