Term · Balance Sheet & Debt
Net debt
In briefNet debt is interest-bearing liabilities less cash and cash equivalents. For smaller issuers with limited access to refinancing it is decisive for assessing default risk.
Definition
Interest-bearing liabilities less cash and cash equivalents.
How it is calculated
Formula. Net debt = interest-bearing liabilities − cash and cash equivalents.
Why it matters for small caps
For smaller issuers with limited access to refinancing, it is decisive for assessing default risk.
Common misreadings
- It is often confused with gross debt, without offsetting the available liquidity.
In the process
Frequently asked
What is net debt?
It shows a company's debt after deducting the available cash and cash equivalents. It thus measures the actual debt burden.
How is net debt calculated?
You subtract cash and cash equivalents from interest-bearing liabilities. A negative value means a net cash position.
How does net debt differ from gross debt?
Gross debt ignores the available liquidity. Anyone who confuses the two overstates the debt burden of a company with a high cash balance.
Related terms
Sources
Primary
IFRS Foundation – IFRS 7 Financial Instruments: Disclosures
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-7-financial-instruments-disclosures/
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-7-financial-instruments-disclosures/
Methodology
IFRS Foundation – IFRS Accounting Standards Navigator
https://www.ifrs.org/issued-standards/list-of-standards/
https://www.ifrs.org/issued-standards/list-of-standards/
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.