Net Debt
Definition
Net debt is total debt minus cash and cash equivalents (and typically short-term investments). It represents the company's debt burden after applying its cash pile, and it is the standard bridge item between equity value and enterprise value: EV = equity value + net debt (+ preferred + minority interest).
Total debt includes short- and long-term borrowings and capital/finance lease obligations; whether items like operating leases or unfunded pensions count as debt-like varies by convention and should be consistent with the metric in the multiple.
Net debt can be negative (net cash) — common for large tech companies — in which case enterprise value is below equity value. Leverage is commonly quoted as net debt / EBITDA.
Why interviewers ask
Net debt appears in every EV bridge question and in credit-oriented ones ("how levered is this company?"). Traps: subtracting only some cash (restricted cash conventions vary), forgetting leases, and mixing conventions across comps so multiples aren't apples-to-apples.
Related terms
Interviews don't test definitions — they test recall under pressure.
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