Net Debt Calculator (total debt − cash, net debt/EBITDA)

Understanding the net debt calculator — concept and principle

This calculator works out net debt: a company's interest-bearing borrowings minus its cash and, optionally, short-term investments. It also shows gross debt, the cash deducted, net debt to EBITDA, net debt to equity and whether the company is in a net debt or net cash position. Analysts, lenders and finance teams use it for leverage checks and loan covenants.

Debt minus cash on hand — with the default inputs: $1,350,000.

How it is calculated

Gross debt = short-term borrowings (including the current portion of long-term debt) + long-term borrowings + lease liabilities (if included)
Cash deducted = cash and cash equivalents + short-term investments counted as cash
Net debt = gross debt − cash deducted (negative = net cash)
Net debt ÷ EBITDA = net debt ÷ yearly EBITDA
Net debt to equity = net debt ÷ shareholders' equity × 100

The principle

Cash on hand could repay part of the borrowing at once, so net debt shows the debt that would remain if the company used its cash for that purpose. Dividing by EBITDA expresses that debt in years of operating earnings before depreciation, a common measure in loan covenants. Dividing by equity compares it with the owners' capital. Definitions differ: some include lease liabilities, some deduct short-term investments, and lenders often set their own rules, so always state what you included.

Worked example

Defaults: short-term borrowings 150,000; long-term 1,250,000; leases 200,000; cash 180,000; short-term investments 70,000; EBITDA 600,000; equity 1,500,000.

Gross debt = 150,000 + 1,250,000 + 200,000 = $1,600,000.
Cash deducted = 180,000 + 70,000 = $250,000.
Net debt = 1,600,000 − 250,000 = $1,350,000: Net debt (debt exceeds cash).
Net debt ÷ EBITDA = 1,350,000 ÷ 600,000 = 2.25 years.
Net debt to equity = 1,350,000 ÷ 1,500,000 = 90%.

Each point is the calculator re-run with only “Long-term borrowings (loans, bonds)” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Long-term borrowings (loans, bonds)	Net debt
312,500	$412,500
625,000	$725,000
937,500	$1,037,500
1.25e+06	$1,350,000
1.56e+06	$1,662,500
1.88e+06	$1,975,000
2.5e+06	$2,600,000

How to read the result

A lower net debt to EBITDA means the company could repay its debt faster from operating earnings. Acceptable levels depend on industry and on lenders: stable businesses carry more than cyclical ones. A net cash position gives flexibility but may also mean capital is not being used. Compare across years and with peers using the same definition.

Common mistakes

Including trade payables in debt.
Deducting cash that is restricted or needed for daily operations.
Comparing figures where one includes leases and the other does not.
Using EBITDA for part of a year.

Keep in mind: Net debt is a simplified measure; maturities, interest rates and covenants matter too. Not financial advice.

Frequently asked questions

What does negative net debt mean?

The company holds more cash and short-term investments than debt, a net cash position.

What is a typical net debt to EBITDA covenant?

It varies by lender, industry and credit quality; check the actual loan agreement.

Should lease liabilities be included?

Many analysts include them since lease accounting changes; follow the definition your lender or report uses.

Sources: Association of Corporate Treasurers, ACT Wiki, "Net debt" · CFA Institute, "CFA Program Level II Financial Ratio List"

Checked 9 Nov 2026. Net debt = total debt − cash and cash equivalents (definitions vary in detail; state them): Association of Corporate Treasurers, ACT Wiki “Net debt”. Total debt = interest-bearing short-term and long-term debt: CFA Institute, “CFA Program Level II Financial Ratio List” (item 29).

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