Net debt / EBITDA is a multiple: it tells you how many times bigger a company's net debt is than one year of its operating profit (EBITDA, explained in the EV/EBITDA entry). Net debt means debt minus cash on hand, since that cash could repay debt immediately. Because EBITDA is one year's profit, the multiple reads directly as years: 2 times means the debt equals two years of profit, so two years of it would clear the debt. 0.1 times means a tenth of a year, about five weeks of profit, a trivial debt load.
The value goes negative when a company holds more cash than debt. That is a good sign: it could repay everything today and still have cash left over. This is called a net cash position, the safest balance sheet there is.
How to read it: • Under 1 times: very conservative, typical of cash-rich tech and consumer brands • 1 to 3 times: comfortable for most businesses • 3 to 4 times: heavily leveraged, where credit-rating agencies start to worry • Above 4 to 5 times: stressed, where a drop in earnings can leave the company unable to renew its loans
One warning: EBITDA ignores spending on equipment, a real cash cost, so for equipment-hungry businesses like telecoms and utilities the true payoff period is longer than this number suggests.