Net Debt
Total debt minus the cash on hand — the weight of debt after counting the cash that could pay it off right now.
Net debt = total debt (short-term + long-term borrowings) − cash and cash equivalents
Small or negative net debt (net cash) is read as a solid balance sheet.
In plain terms
Even with $10 billion in debt, if there is $4 billion of cash in the bank, that part could be paid off at any time, so the real burden is closer to $6 billion. That $6 billion is net debt.
It is the "real debt" left after subtracting the cash a company holds. A company sitting on as much cash as it owes has net debt of zero or below zero (net cash).
What it tells you
It looks past the headline size of the debt to the actual debt burden after cash is taken into account.
When net debt is zero or negative (net cash), debt is barely a concern, and the company has room to weather a downturn or to fund acquisitions and shareholder returns.
Formula
Net debt = total debt (short-term + long-term borrowings) − cash and cash equivalents
What high or low means
Small or negative net debt (net cash) is read as a solid balance sheet.
Large net debt means a heavier debt burden, though a company that earns well can carry it — so repayment capacity is viewed alongside it using net debt/EBITDA.
Net debt can look small because of a big cash pile, yet that cash may be held overseas or earmarked for a specific use and not freely available.
Net debt is a figure at a single point in time, so it can shift quickly right after a large acquisition or a big dividend payout. It is used as an input for enterprise value (EV) and net debt/EBITDA.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.