Net debt is a way to measure how much money a company owes after using its cash and other liquid assets to pay off as much debt as possible. It can help assess how well a company can meet its debt obligations if they were all due today and how much more debt it can take on. The formula for net debt is:
Net debt = (Short-term debt + Long-term debt) - Cash and cash equivalents
Where:
- Short-term debt (BS043,
bs_short_term_debt_detailed) is the debt that is due in 12 months or less and can include short-term bank loans, accounts payable, and lease payments.
- Long-term debt (BS052,
bs_long_term_borrowings_detailed) is the debt that has a maturity date longer than one year and can include bonds, lease obligations, notes payable, and convertible bonds.
- Cash and cash equivalents (BS002,
bs_cash_near_cash_item) are the cash and liquid investments that a company can easily convert to cash. They can include marketable securities, commercial paper, treasury bills, and bank accounts.