Series 79: 3.1.2. Net Debt

3.1.2. Net Debt

A company’s net debt is a measure of how much debt the company holds in relation to its liquid assets. The idea behind this concept is that the company’s cash and cash equivalents could be used to pay off its debt, so net debt is a better assessment of the real value of the company’s debt than is its total debt. The formula is:

net debt = short-term debt + long-term debt – cash & cash equivalents

These figures are found on the balance sheet. Most companies will have some amount of net debt. The amount of a company’s net debt is most telling when viewed in relation to similarly