Basic Net Debt
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Frequently Asked Questions about Net Debt
What is net debt?
Net debt is a company's total interest-bearing debt minus cash and cash equivalents. The formula: net debt = total interest-bearing debt − cash & cash equivalents. It shows how much debt truly “remains” after using the cash on hand to pay down debt.
How do you calculate net debt? Give an example.
Example: a company with total interest-bearing debt of Rp1,000 and cash of Rp300 has net debt = 1,000 − 300 = Rp700. With an itemized breakdown — short-term debt 100, long-term debt 500, lease liabilities 80, cash 200 — total debt = 680 and net debt = 680 − 200 = Rp480. Enter your figures in the “Components” mode in the calculator above for automatic results.
What does negative net debt (net cash) mean?
Negative net debt means the company's cash exceeds its total interest-bearing debt — this condition is called net cash. Example: debt of Rp500 and cash of Rp800 gives net debt = −Rp300, meaning the company holds Rp300 of net cash after all interest-bearing debt is repaid. This generally signals a conservative capital structure.
What is the net debt to EBITDA ratio?
The net debt/EBITDA ratio measures how many years of operating profit (EBITDA) it would take to repay all net debt. Example: net debt of Rp700 and EBITDA of Rp350 gives a ratio of 2x. A lower ratio generally indicates a lighter debt burden relative to earnings power.
How is this net debt calculator different from the enterprise value calculator?
This calculator computes net debt itself (interest-bearing debt − cash), while the enterprise value calculator at /tools/enterprise-value/ uses net debt as one of its INPUTS to compute company value (enterprise value = market capitalization + net debt). Use this calculator first to get net debt, then enter the result into the enterprise value calculator.
Which debt components should be included?
Ideally all interest-bearing debt: short-term bank debt, long-term debt (including bonds), lease liabilities, and other interest-bearing debt such as notes payable. Trade payables (accounts payable) are generally excluded because they bear no interest. On the deduction side, use cash and cash equivalents from the balance sheet.
Are this calculator's results investment advice?
No. This calculator's results are educational estimates based on the numbers you enter, not financial advice or investment recommendations. Investment decisions should consider many other factors and, if needed, be discussed with a licensed financial adviser.