Net debt.
In plain English
Net debt adds up short-term and long-term borrowings, then subtracts cash, cash equivalents, and marketable securities. The idea is simple: money sitting in the account could retire debt tomorrow, so gross borrowings alone overstate the burden. A company with more cash than debt has negative net debt, sometimes called a net cash position. Net debt feeds directly into enterprise value and into the coverage ratios lenders watch. It says nothing about when the debt comes due, which is a separate and often more urgent question.
01Why it matters
Two companies can carry identical borrowings and face completely different risk, because one holds enough cash to pay most of it off and the other does not.
02The math, step by step
A company owes $1.2 billion in bonds and $300 million on a credit line, and holds $700 million in cash. $1.5 billion minus $700 million is $800 million of net debt, roughly half what the gross borrowings suggest.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
Total debt is the gross borrowing figure. Net debt nets cash against it. A screen sorted on total debt and a screen sorted on net debt can rank the same companies in a different order, and cash-rich businesses are the ones that move most.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice