Net Debt

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DEFINITION of 'Net Debt'

A metric that shows a company's overall debt situation by netting the value of a company's liabilities and debts with its cash and other similar liquid assets.

Calculated as:

 

Net Debt

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BREAKING DOWN 'Net Debt'

When investing in a company, one of the most important factors you need to consider is how much debt the company is carrying. Here are some questions to ask yourself when analyzing a company's debt: How much debt really exists? What kind of debt is it (long/short-term maturities)? What is the debt for (repay or refinance old debts)? Can the company afford the debt if it runs into financial trouble? And, finally, how does it compare to the debt levels of competing companies?

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RELATED FAQS
  1. Why would you look at a company's net debt rather than its gross debt?

    Understanding debt carried by a company is key to gaining insight into its financial health. One of the various ways an observer ... Read Full Answer >>
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    In corporate valuation as in corporate accounting, numerous metrics are used to assess the worth of a business and its ability ... Read Full Answer >>
  3. How do I evaluate whether a company is a good acquisition candidate?

    Mergers and acquisitions allow businesses to increase their market share, expand their geographic reach and become larger ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
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    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
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    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>

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