Net Debt
Private Equity glossary · Paper LBOs & Returns Math
Definition
Total financial debt minus cash and cash equivalents.
Net Debt in plain English
Net debt asks a simple question: if this company used all its spare cash right now to pay off its loans, how much debt would still be left? You take everything it owes (total debt) and subtract the cash it has sitting in the bank. It's like saying your $20,000 car loan isn't really a $20,000 burden if you also have $5,000 in savings you could throw at it — your real, 'net' debt is $15,000. This gives a truer picture of how indebted a company actually is than just looking at the loan total alone.
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