Net Debt Calculator
Calculate a company's net debt by subtracting cash and cash equivalents from total debt. Net debt shows how much debt would remain if all liquid assets were used to pay it down, making it a better measure of financial health than gross debt alone.
Net debt is one of the most important metrics for evaluating a company's true debt burden. The formula: Net Debt = Total Debt - Cash and Cash Equivalents. A company with $2.5 million in total debt but $750,000 in cash has a net debt of $1.75 million.
A negative net debt means the company has more cash than debt, which is generally a sign of strong financial health. Many large tech companies like Apple and Google carry negative net debt because they hold massive cash reserves. On the other hand, a high net debt relative to earnings or equity can signal financial risk.
Investors and analysts often look at the Net Debt to EBITDA ratio to gauge whether a company can comfortably service its obligations. A ratio under 2x is typically considered healthy, while anything above 4x may raise concerns. Lenders also use net debt when evaluating creditworthiness and setting loan covenants.