Net debt

Borrowings minus cash. The measure of indebtedness that accounts for the money already sitting in the bank to repay it.

Example

Northgate's borrowings of 1,100,000 less cash of 45,000 gives net debt of 1,055,000, which is 1.45 times its EBITDA of 730,000.

The same gross borrowings mean very different things at different cash levels. Read net debt, and read it against earnings, not in isolation.

EBITDA — Earnings before interest, tax, depreciation and amortisation - in practice, operating profit with the depreciation and amortisation charge added back.
Interest coverage — Operating profit divided by the interest charge - how many times over the year's earnings could pay the year's cost of borrowing.
Balance sheet — A statement of everything a business owns and everything it owes at one specific moment. What is left after subtracting the second from the first belongs to the owners.

Three engines: profit growth, debt paydown and a higher exit multiple — Buyout returns come from growing earnings, using cash flow to repay debt, and selling at a higher valuation multiple - and only the first is reliably within the manager's control. (13 min)
The balance sheet: what it owns and what it owes — A photograph taken on one specific day, showing what the business has, who has a claim on it, and what is left over for the owners. It is the statement that tells you whether a bad year is survivable. (13 min)
What the three say together — Each statement answers a question the others cannot, and the interesting information is almost always in the disagreements between them rather than in any single figure. (14 min)
Comparables and multiples: what the market is already paying — A multiple is not a shortcut past valuation. It is somebody else's valuation, compressed into one number, and using it means inheriting every assumption inside it. (12 min)