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 more complete picture of a company's financial health than looking at debt alone.

2. How Does the Calculator Work?

The calculator uses the Net Debt formula:

Where:

• \( \text{Total Debt} \) — All of the company's outstanding debt obligations
• \( \text{Cash \& Cash Equivalents} \) — Liquid assets that can be quickly converted to cash

Explanation: Net debt shows how much debt would remain if a company used all its liquid assets to pay down debt.

3. Importance of Net Debt Calculation

Details: Net debt is important for assessing a company's ability to meet its obligations, comparing companies within the same industry, and evaluating financial leverage.

4. Using the Calculator

Tips: Enter total debt and cash & equivalents in dollars. Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in total debt?
A: Total debt typically includes short-term borrowings, current portion of long-term debt, and long-term debt.

Q2: What counts as cash equivalents?
A: Cash equivalents include treasury bills, money market funds, and other highly liquid investments with maturities of three months or less.

Q3: Can net debt be negative?
A: Yes, negative net debt means a company has more cash than debt, indicating strong financial position.

Q4: How does net debt differ from gross debt?
A: Gross debt looks at total debt without considering cash reserves, while net debt provides a more nuanced view.

Q5: Why is net debt important for investors?
A: It helps investors assess a company's ability to pay off debt and its financial flexibility in challenging times.