Which ratio is commonly used to measure the maximum leverage in LBOs?

The Debt-to-EBITDA ratio is the most appropriate measure of maximum leverage in Leveraged Buyouts (LBOs) because it provides insight into a company's ability to pay off its incurred debt based on its earnings. In the context of an LBO, a significant amount of debt is used to finance the acquisition of a company. The Debt-to-EBITDA ratio effectively highlights how many times a company’s earnings before interest, taxes, depreciation, and amortization can cover its debt obligations.

Using this ratio allows investors and analysts to assess the risk associated with a leveraged investment since it directly relates the company’s operational performance to its debt levels. A lower ratio indicates a greater ability to manage and service debt, which is critical in LBO scenarios where cash flow is paramount for debt repayments.

While the other ratios mentioned serve specific financial analysis purposes, they do not specifically capture the relationship between a company’s operational earnings and its ability to handle debt within the context of an LBO scenario as effectively as the Debt-to-EBITDA ratio does.