Net Debt

Net debt is a financial metric that represents a company's total debt minus its cash and cash equivalents. It provides a clearer picture of a company's financial obligations by showing how much debt would remain if all available cash were used to pay it down. A negative net debt, sometimes called net cash, indicates a company has more cash than debt.

A trader evaluating a company's financial health might note that it carries $500 million in total debt but holds $200 million in cash, resulting in a net debt of $300 million. A company with a manageable net debt relative to its earnings is generally considered financially stable. Traders using fundamental analysis may use net debt figures alongside EBITDA to calculate the net debt-to-EBITDA ratio, a widely used metric for assessing how long it would take a company to pay off its debt using its operating earnings.