Finance KPI Definitions for PE-Backed Companies

Most reporting packs center on these:

• Adjusted EBITDA: earnings before interest, taxes, depreciation and amortization, adjusted for items the credit agreement and sponsor allow.
• Free cash flow (FCF) conversion: the share of EBITDA that becomes cash after capital spending, working capital changes and cash taxes.
• Net debt ratio: net debt divided by trailing twelve-month adjusted EBITDA.
• Fixed charge coverage ratio (FCCR): cash earnings available to cover interest and scheduled principal.
• Net working capital: receivables plus inventory minus payables and accruals, often as a percentage of revenue.
• Growth and mix: revenue growth, backlog or bookings, and gross margin by segment.
• Rule of 40 for software companies: revenue growth plus EBITDA margin.

Sponsors also compare your EBITDA margin with peers. In NYU Stern's January 2026 industry data, the total-market EBITDA margin excluding financials was 17.42 percent¹, though the range across industries is wide, so use peers in your own sector.

Write a one-page definition and get sign-off from the sponsor and the finance lead. Work through these elements:

1. Base: start with net income from your monthly financial statements, prepared consistently.
2. Standard add-backs: interest, income taxes, depreciation and amortization.
3. Non-recurring items: list each category you'll adjust for, such as restructuring, transaction costs, integration costs and one-time legal matters, and require support for each.
4. Sponsor fees: state whether monitoring fees are added back.
5. Caps and limits: many credit agreements cap certain add-backs, such as projected cost savings, so match the agreement's language.
6. Period: use trailing twelve months for net debt tests, and say how you treat acquisitions during the period.

Maintain a monthly bridge from net income to adjusted EBITDA showing every adjustment. If an item appears in three consecutive months, reconsider whether it's really non-recurring; a bridge full of repeat add-backs will lose lenders' trust.

Use your credit agreement's definitions where they differ from these generic ones. With round numbers as an example, say trailing twelve-month adjusted EBITDA is $4.0 million, funded debt is $13 million and unrestricted cash is $1 million.

• Say net debt is $13 million minus $1 million of cash, which is $12 million: divided by $4.0 million of adjusted EBITDA, the ratio is 3.0x.
• Say capital spending is $0.5 million, cash taxes are $0.6 million, interest is $1.0 million and scheduled principal is $0.7 million. In this example, fixed charge coverage is ($4.0 million minus $0.5 million minus $0.6 million) divided by ($1.0 million plus $0.7 million), or about 1.7x.
• Say the increase in net working capital was $0.3 million. In this example, FCF conversion is ($4.0 million minus $0.5 million minus $0.3 million minus $0.6 million) divided by $4.0 million, or 65 percent.

The exact formulas vary by lender, so build the calculation once from the agreement and have a second person check it against the covenant language.

Give it a fixed shape and timetable:

1. Close the books by a set business day, with reconciliations complete.
2. Produce the KPI table with current month, year to date, trailing twelve months and budget.
3. Include the EBITDA bridge and the covenant calculation.
4. Add two or three sentences of commentary on each metric that missed plan.
5. Reconcile the sponsor pack to the bank compliance certificate, so both use the same numbers.
6. Send before the board or lender call, not during it.

The first hundred days after an acquisition are when this gets built; the 100-day finance plan for PE portfolio companies lays out the sequence. Many teams use a planning tool for the covenant math and a close management tool for the checklist. Jirav can connect ledger data to reporting, and FloQast can manage the close; see FloQast vs BlackLine vs Numeric and ask in a demo how each handles covenant calculations.

Watch for these:

• Changing a definition mid-year without restating prior periods.
• Reporting adjusted EBITDA to the sponsor on one basis and to the lender on another.
• Repeat add-backs labeled one-time.
• Leaving out cash items such as capitalized software or leases that the agreement treats as debt or fixed charges.
• Reporting the net debt ratio against a forecast instead of trailing actuals.
• Late or unreconciled packages that arrive after the meeting.

If you're also comparing vendors in the same portfolio, the portco-specific comparisons, such as FloQast vs AuditBoard for PE portfolio companies, can help you choose systems the sponsor is comfortable with.