How this calculator works
Net debt subtracts the cash a company already holds from its total borrowings. It answers a sharper question than gross debt: how much would still have to be raised if the company put all its cash and near-cash assets toward repayment? A company with large gross debt but equally large cash balances may be less leveraged than it first appears. Analysts usually include bank loans, bonds, notes and lease liabilities, and exclude trade payables because they are operating obligations rather than financing. A negative net debt means cash exceeds borrowings, which is a strong position but may also mean the cash is not being deployed.
Formula
Total debt = short term debt + long term debt, or the sum of current and non-current borrowings including leases. Cash and cash equivalents = cash + cash equivalents. Net debt = total debt - cash and cash equivalents. Cash = total debt - net debt. Total debt = net debt + cash.
Worked example
Short term debt of $100,000 and long term debt of $300,000 give total debt of $400,000. With $200,000 of cash and cash equivalents, net debt is $200,000. The detailed breakdown gives the same answer: $100,000 + $20,000 of current borrowings plus $280,000 of non-current debt is $400,000, and $150,000 + $50,000 of cash is $200,000.
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Frequently asked questions
Should lease liabilities be included?
Under IFRS 16 and US GAAP for operating leases, most leases appear on the balance sheet as liabilities. Including them gives a more complete picture of fixed obligations. Some analysts still report a pre-lease net debt figure for comparability with older periods, so state which convention you use.
Are trade payables part of net debt?
Usually not. Trade payables are amounts owed for goods and services already received and are part of working capital, not interest-bearing financing. Some practitioners include them in a broader measure, but the standard definition excludes them.
What does negative net debt mean?
Cash and equivalents exceed borrowings. The company could repay all of its debt and still hold cash. This reduces financial risk but may indicate excess cash that could be returned to shareholders or invested.