Net Debt / Net Leverage
Corporate Credit Analysis glossary · Credit Metrics & Debt Schedule Modeling
Definition
Total debt minus cash and cash-equivalents, often used as the numerator for the more economically meaningful leverage measure (Net Debt / EBITDA) when sizeable cash balances exist.
Net Debt / Net Leverage in plain English
Net debt says: don't just count what a company owes, count what it owes AFTER using its spare cash to pay some of it down. So you take total debt and subtract the cash it's sitting on, because that cash could wipe out debt tomorrow. If you owe $500 on a credit card but have $200 in your bank account, your "net" debt is really $300. Analysts then compare that to yearly earnings (Net Debt / EBITDA, roughly debt versus profit) to judge how heavy the true debt load is, which is fairer for companies holding a big cash pile.
Learn these first
Related Corporate Credit Analysis terms
Corporate Credit Analysis practice questions · Corporate Credit Analysis flashcards · Corporate Credit Analysis study guide