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Financial health & leverage

Net Debt

A company's total debt minus the cash it holds, showing what it would owe after paying down debt with cash on hand.

Part of the Financial Health & Risk course · Lesson 2 of 13
Formula
Short-Term Debt + Long-Term Debt − Cash & Equivalents

What it is

Net debt is total borrowings reduced by cash and cash equivalents (and often short-term investments). The idea is that cash on the balance sheet could be used to pay off debt immediately, so it gives a truer picture of the obligation that remains. If a company holds more cash than debt, net debt is negative, often called a net cash position.

Why it matters

Net debt is the leverage figure most lenders and acquirers focus on, because it reflects the real burden after available cash is applied. A negative net debt (net cash) signals balance-sheet strength and flexibility, while rising net debt can signal stress or heavy investment. It is also the bridge between a company's market value and its enterprise value.

How it's calculated

Add up short-term and long-term interest-bearing debt, then subtract cash, cash equivalents, and (in many definitions) short-term marketable investments.

How Quintarthai uses it

Net debt is built from the Financials tab balance sheet and feeds the enterprise-value ratios shown in the Ratios tab of a company's deep-analysis page.

Cross-border note. Cash and short-term investment line items can be classified differently under IFRS (common for Canadian filers) versus US GAAP, so confirm what is netted before comparing Canadian and US companies.

FAQ

What does negative net debt mean?
It means the company holds more cash and equivalents than total debt, a position called net cash. This is generally a sign of balance-sheet strength, though very large cash piles can also raise questions about capital allocation.
Why subtract cash from debt?
Because cash on hand could be used to repay debt right away, so net debt better reflects the obligation that would actually remain. It is the standard input for enterprise value and for the Net Debt / EBITDA ratio.
Related terms
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