π¦ Net Debt Calculator
What a company really owes once its cash is counted.
Total debt minus cash and equivalents
Estimates for planning only, not financial advice.
Net debt is the debt a company could not pay off tomorrow from its own cash: total interest-bearing debt minus cash and cash equivalents. A business with $1.2 million of debt and $300,000 sitting in the bank owes $900,000 net, and that is the number buyers, lenders, and analysts actually argue about. Gross debt flatters cash-poor companies and punishes cash-rich ones; net debt strips that distortion out.
How to Use This Calculator
Enter short-term debt (the current portion of loans, credit lines, notes due within a year) and long-term debt (bonds, term loans, the non-current part). Add cash and equivalents: actual cash plus money-market funds and short-term Treasuries. If you have EBITDA handy, add it to get the net debt to EBITDA ratio, the single leverage number most credit agreements are written around.
Pull total debt from the balance sheet: short-term borrowings plus long-term debt, including finance leases. Skip operating liabilities like accounts payable.
Subtract cash and cash equivalents. Be honest here: restricted cash that cannot be touched does not count.
Read net debt and the leverage ratio. To see what the debt costs to carry each month, run the balance through our loan amortization calculator.
The Net Debt Formula
Only interest-bearing debt belongs in the first line. Accounts payable, accrued wages, and deferred revenue are operating liabilities, not financing, and mixing them in overstates leverage. Cash equivalents are the short-term, highly liquid investments a company could convert to cash within days. The EBITDA ratio then asks how many years of operating earnings it would take to clear the net debt: 2.0x means two years, roughly.
Worked Example
A manufacturer carries $400,000 in short-term borrowings and $800,000 in long-term loans, with $300,000 of cash on hand and EBITDA of $450,000. Gross debt is $1,200,000. Net debt is $1,200,000 minus $300,000, which is $900,000. The leverage ratio is $900,000 divided by $450,000, or 2.0x. Most lenders get comfortable under 3.0x for a healthy business and start adding covenants above 4.0x, so 2.0x reads as moderate leverage with room to borrow.
Reading Your Result
A positive number means the company owes more than it holds. A negative number means net cash: the company could repay everything and still have money left, which is common for software firms and rare for capital-heavy ones. Watch the trend more than the level. Net debt rising while EBITDA is flat means the company is borrowing to stand still, which is how balance sheets get into trouble.
My rule: compare net debt to EBITDA, not to revenue or assets. Revenue can be vanity and assets can be stale book values, but EBITDA is the cash engine that services the debt. If you are sizing up a whole business rather than one ratio, our net worth calculator gives the personal-finance mirror image: assets minus liabilities.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is net debt in simple terms?
Net debt is what a company would still owe if it used all its cash to repay debt today. You add up the short-term and long-term borrowings, then subtract cash and cash equivalents. It answers the honest question: after the cash cushion, how much real debt is left standing.
Why do analysts use net debt instead of total debt?
Because cash changes the picture. Two companies can each owe $10 million, but if one holds $9 million in cash and the other holds $100,000, they are in very different shape. Net debt puts both on the same footing. Enterprise value, the price a buyer really pays for a company, is built on market cap plus net debt for exactly this reason.
What is a good net debt to EBITDA ratio?
Under 2.0x is comfortable for most industries, 2.0x to 3.0x is normal leverage, and above 4.0x usually triggers lender covenants and higher borrowing costs. Capital-heavy industries like utilities run higher; asset-light software companies often sit at zero or negative. Always compare within the same industry.
Can net debt be negative?
Yes, and it is a sign of strength. Negative net debt means cash exceeds total debt, a net cash position. The company could repay every loan tomorrow and keep the change. Many large tech companies sit in this position because they generate more cash than they can sensibly reinvest.
Does net debt include accounts payable?
No. Net debt covers interest-bearing debt: loans, bonds, credit facilities, and finance leases. Accounts payable, accrued expenses, and deferred revenue are operating liabilities tied to running the business, not financing it. Including them would mix two different kinds of obligation.
How is net debt different from enterprise value?
Enterprise value starts with market capitalization and adds net debt (plus minority interest and preferred stock, minus some adjustments). Net debt is one ingredient; enterprise value is the full purchase price of the whole company. If you know the market cap and the net debt, you are most of the way to enterprise value.
Should restricted cash be subtracted?
No. Only cash the company can actually use counts. Cash trapped in escrow, pledged as collateral, or held in foreign subsidiaries it cannot repatriate freely should stay out of the subtraction. When in doubt, use the unrestricted cash line from the cash flow statement notes.
Where do I find the inputs on financial statements?
Short-term and long-term debt sit on the balance sheet under liabilities, often labeled borrowings or notes payable. Cash and equivalents is the first line under current assets. EBITDA is not a GAAP line; compute it from the income statement as operating income plus depreciation and amortization, or take it from the company's own earnings release.
Does net debt include leases?
Finance leases (formerly capital leases) yes, because they are really debt. Operating leases are trickier: under current accounting rules most appear on the balance sheet as right-of-use assets with matching liabilities. Many analysts add the operating lease liability into debt for a stricter read.
Why did net debt rise if the company is profitable?
Profit is not cash. A profitable company can still borrow to fund working capital, buy back shares, pay dividends, or acquire another business. Check the cash flow statement: if operating cash flow is strong but financing outflows are bigger, the debt funded shareholder returns, not losses.