Target Leverage
Short definition
Target leverage is the debt band management aims to hold over the medium term (often net debt/EBITDA or D/E). It is a band, not a point; the credit market and the cash cycle allow a miss.
Detailed explanation
The target must be consistent with ratings, covenants and tax capacity. Adjustment is via dividends, capex and issue/repay; because that is costly, the miss can persist.
M&A and growth open a temporary miss on purpose; without a close-back plan the target is rhetoric. There is no universal target multiple.
Why it matters for the CFO
WACC weights sit on the target structure; actual structure may have missed in the stress year.
How to read it
Below target sits unused capacity; above it, distress and rating pressure. The band moves with sector and the rate regime.
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Definitions are educational. They are not investment, credit or tax advice.