HOMEPAGE

Net Debt

Definition

Net Debt measures a company’s total debt after subtracting cash and cash equivalents. It shows the true debt burden.

$$\text{Net Debt}=\text{Total Debt}-\text{Cash and Cash Equivalents}$$

Why It Matters

• Indicates whether a company could theoretically pay off its debt with available cash.
• More accurate than looking at total debt alone.
• Key input for leverage ratios and valuation models (EV calculations).

Interpretation

• Positive Net Debt: Company owes more than it holds in cash.
• Negative Net Debt: Company has more cash than debt — very strong balance sheet.

Example

Total Debt = $800M Cash & Equivalents = $300M

$$\text{Net Debt}=800-300=500\text{million}$$