Net Debt Definition – Example, InvestingAnswers, what is the definition of debt.#What #is #the #definition

Net Debt

Net debt is a company’s total debt less cash on hand.

The formula for net debt is:

For example, let’s assume that Company XYZ has $10,000,000 in short-term debt, $4,000,000 in long-term debt, and $1,000,000 in cash and cash equivalents. According to the formula, Company XYZ’s net debt is:

Net Debt = $10,000,000 + $4,000,000 – $1,000,000 = $13,000,000

Why it Matters:

Net debt is a measure of a company’s ability to repay its debts if they were all due today. Thus, it helps analysts and investors get a better feel for whether a company is over- or underleveraged — that is, whether a company can “afford” its debt . Companies with large amounts of debt but also large cash positions are generally in better positions to weather adverse changes in the economic landscape, like interest rate fluctuations, recessions, etc.

To learn more about evaluating companies’ debt loads, click here to read, The One Key Financial Statistic You Must Know.

Most Popular Calculators


InvestingAnswers is the only financial reference guide you’ll ever need. Our in-depth tools give millions of people across the globe highly detailed and thoroughly explained answers to their most important financial questions.

We provide the most comprehensive and highest quality financial dictionary on the planet, plus thousands of articles, handy calculators, and answers to common financial questions — all 100% free of charge.

Each month, more than 1 million visitors in 223 countries across the globe turn to as a trusted source of valuable information.

What is the definition of debt What is the definition of debt What is the definition of debt What is the definition of debt What is the definition of debt

What is the definition of debt

Leave a Reply

Your email address will not be published. Required fields are marked *