1. What is Net Debt?

Net Debt is a financial metric that shows a company's overall debt situation by subtracting its cash and cash equivalents from its total debt. It provides a clearer picture of a company's ability to pay off its debts if they came due immediately.

2. How Does the Calculator Work?

The calculator uses the Net Debt formula:

Where:

• Total Debt — All short-term and long-term debt obligations
• Cash and Equivalents — Liquid assets that can be quickly converted to cash

Explanation: The formula shows how much debt would remain if all available cash were used to pay down debt.

3. Importance of Net Debt Calculation

Details: Net Debt is important for assessing a company's financial health, determining its leverage, and comparing companies within the same industry. It's particularly useful in mergers and acquisitions.

4. Using the Calculator

Tips: Enter total debt and cash equivalents in dollars. Both values must be positive numbers. The calculator will show the net debt amount.

5. Frequently Asked Questions (FAQ)

Q1: What's included in Total Debt?
A: Total Debt includes short-term borrowings, current portion of long-term debt, long-term debt, capital leases, and other interest-bearing liabilities.

Q2: What counts as Cash and Equivalents?
A: This includes physical cash, bank deposits, short-term investments with maturities of 90 days or less, and marketable securities.

Q3: Why is Net Debt important?
A: It provides a more accurate picture of a company's debt burden by accounting for available cash that could be used to pay down debt.

Q4: What's a good Net Debt value?
A: This varies by industry, but generally lower net debt is better. Negative net debt means the company has more cash than debt.

Q5: How does Net Debt differ from Gross Debt?
A: Gross Debt is the total debt without considering cash reserves, while Net Debt provides a more realistic view by subtracting available cash.