Fundamental Glossary / Debt & Financial Stability
Net Debt
Borrowings minus cash and cash equivalents. The debt that would remain if surplus cash were used to repay it.
Formula
Short-term debt + long-term debt + lease debt - cash and equivalents. Restricted cash is often left out of the subtraction.
What it means
Net debt is the figure used in leverage covenants and in enterprise value. Gross debt overstates the burden when the company holds cash that could repay it.
A negative net debt means cash exceeds debt. The firm is in a net cash position.
How to read it
Falling net debt from free cash flow is deleveraging. Falling net debt from an asset sale or a share issue is a one-time repair. The path matters.
What to watch
Cash sitting in a subsidiary that cannot be moved, or cash needed as margin, is not available to pay the parent's lenders. Do not subtract it in full.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.