Private Equity Debt Ratio Analysis

This video is Part 3 of an introduction to private equity. In this video we will explore how to determine the appropriate amount of leverage for a target investment.

00:39 The Decision to Assume Debt
01:57 Getting Technical
02:20 Debt-to-EBITDA Ratio
02:39 Senior Lender Term Sheet
02:49 Total Leverage Ratio vs Senior Leverage Ratio
02:58 EBITDA (Not a Great Proxy for Cash Flow)
03:21 Fixed Charge Coverage Ratio
03:35 Excel Workbook Visual
05:20 Comparing Multiple Capital Structures

Notes:

What is Private Equity?

Private Equity Training:

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MORE ASM PRIVATE EQUITY CONTENT ON YOUTUBE

Private Equity Industry Due Diligence (Real Example)

Private Equity Bidding Strategy

Private Equity Sourcing Funnel

Favorite LOI Negotiation Story

The Working Capital Adjustment Explained

The Stock Purchase Agreement

Purchase Price in Private Equity

LBO Case Study

[johnshuttleworth]

Terrific content. I stumbled across your series and am super impressed by the logical and clear explanation of Private Equity. Great work. It's saved me a lot of time understanding how firms and deals are structured.

[CJohnson]

I was justing thinking, I want to listen to debt ratio analysis tutorial. LOL. Good stuff.

[olesyakoktyan]

Great review! Quick question. What’s the treatment of operating leases u see the US GAAP in terms of calculation of FCCR? Do you need to add back rent expense to EBITDA and at the same time add back same rent expense as part of debt service? Or use EBITDA in the nominator and use only Debt service to account for LTD and capital leases? Thank you

[victoriadecastro]

Loving ASM content! However, the 2billion loss tale could have been explained. I'd love to see (and was expecting to see) it be explained in a similar way as the Gibson example, with tables of value through time, and maybe noting when and why it went wrong.

[simfinso]

Nice. Currently all over world Banks are sitting on Cash to Lend but borrowers are hesitating to Borrow due to uncertainty.This leads more Equity & less Debt. Leveraging Benefits( Including Increase in ROI ) are vanished from mind' s of Finance Manager of the firms.Debt to Equity Ratio Highly Depends on Economic Conditions of the Country & Company. Correct ?