Net Debt Calculator
Calculate net debt and leverage ratios to assess a company's financial health and capital structure. This calculator helps evaluate borrowing levels and financial risk.
Debt & Cash Data
Equity Data
Net Debt Results
Net Debt:
$0.00
Debt-to-Equity Ratio:
0.00x
Net Debt to EBITDA:
0.00x
Leverage Analysis
Leverage Level:
N/A
Financial Risk:
N/A
Capital Structure:
N/A
Business Insights
Liquidity Position:
N/A
Creditworthiness:
N/A
Investment Appeal:
N/A
Understanding Net Debt
Net debt is a key financial metric that represents a company's total debt minus its cash and cash equivalents. It provides a more accurate picture of a company's actual debt burden and financial health.
What is Net Debt?
Definition
- Total debt minus cash and equivalents
- Actual borrowing burden
- Key leverage indicator
- Used in valuation models
Formula
- Net Debt = Total Debt - Cash & Cash Equivalents
- Can be positive or negative
- Negative net debt = net cash position
- Expressed in currency units
Leverage Ratios
Key Leverage Metrics
Measuring financial leverage
Debt-to-Equity Ratio:
- Total Debt ÷ Total Equity
- Measures financial leverage
- Higher ratio = more leverage
- Industry-specific benchmarks
Net Debt to EBITDA:
- Net Debt ÷ EBITDA
- Debt repayment capacity
- Credit rating factor
- Lending covenant metric
Interpreting Net Debt Levels
| Net Debt Level | Interpretation | Advantages | Risks |
|---|---|---|---|
| Negative Net Debt | Net cash position | Strong liquidity, low risk | Underutilized capital |
| Low Net Debt | Conservative leverage | Financial stability | Limited growth potential |
| Moderate Net Debt | Balanced capital structure | Optimal financing | Interest rate risk |
| High Net Debt | Aggressive leverage | Higher returns on equity | Financial distress risk |
Net Debt in Valuation
Enterprise Value:
- EV = Equity Value + Net Debt
- Total value of the business
- Independent of capital structure
- Used in multiples valuation
Free Cash Flow Analysis:
- FCFF vs FCFE considerations
- Debt impact on cash flows
- Leverage effects on valuation
- Tax shield benefits
Industry Benchmarks
Debt-to-Equity Ratios:
- Technology: 0.1-0.3x
- Manufacturing: 0.4-0.8x
- Utilities: 0.8-1.2x
- Real Estate: 1.0-2.0x
Net Debt to EBITDA:
- Investment Grade: <3.0x
- BBB Rating: 3.0-4.0x
- Junk Status: >4.0x
- Distressed: >6.0x
Capital Structure Decisions
Optimal Leverage:
- Trade-off theory
- Tax benefits vs bankruptcy costs
- Industry norms
- Business cycle considerations
Pecking Order Theory:
- Internal financing preferred
- Debt before equity
- Information asymmetry
- Financing hierarchy
Net Debt and Cash Flow
Debt Service Coverage:
- Interest coverage ratio
- Debt repayment capacity
- Cash flow adequacy
- Covenant compliance
Working Capital Impact:
- Cash position effects
- Liquidity management
- Investment opportunities
- Risk management
Key Takeaways for Net Debt
- Net debt represents total debt minus cash and cash equivalents
- Negative net debt indicates a net cash position with strong liquidity
- Debt-to-equity ratio measures financial leverage relative to equity
- Net debt to EBITDA assesses debt repayment capacity
- Leverage levels vary significantly by industry and business model
- Net debt is used in enterprise valuation calculations
- Capital structure decisions affect net debt and financial risk
- Monitoring net debt helps assess financial health and investment risk