Net Debt Calculator
What is Net Debt?
Net debt is the result of subtracting a company's most liquid assets (cash and cash equivalents) from its total obligations (liabilities). This value informs shareholders about the amount of money the company has in its accounts to pay other parties. In other words, it represents the net amount of money that the company owes.
To better understand net debt, we should first define total debt. Total debt includes all the financial obligations a business or company has to other parties. It contains both short-term debt and long-term debt.
Short-term liabilities, or current liabilities, are debts that the company must pay within a year. Examples of short-term liabilities include:
Accounts payables
Wage payables
Utility payables
Deferred revenues within 12 months of the due time
Short-term debt
Current portion of long-term debt
Current portion of leases
On the other hand, long-term liabilities are obligations that are due in a period longer than a year. Some examples of long-term liabilities are:
Bonds
Long-term bank loans
Deferred revenue
Pension plans
Leases
Net debt is essential for analyzing the company's funding structure and its use of credit compared to equity for its operations.
How to Use Net Debt Calculator
To calculate net debt, the formula is:
Net debt = Short-term liabilities + Long-term liabilities - Cash and cash equivalents
You can find short-term liabilities, long-term liabilities, and cash & cash equivalents in the company's balance sheet, specifically in the liabilities and assets sections.
Example to Demonstrate the Calculator
To demonstrate how to calculate net debt, let's use Tesla Motors as an example. From Tesla's financial statements, we can obtain the following values:
Cash and cash equivalents (CCE): $16,065 million
Short-term liabilities (CL): $18,051 million
Long-term liabilities (NCL): $11,289 million
Using the net debt formula, we have:
Net debt = $18,051 million + $11,289 million - $16,065 million
Net debt = $13,275 million
Now, let's calculate Tesla Motors' financial debt. From its quarterly report, we can find these values:
Current portion of long-term debt (CPLTD): $1,207 million
Current part of leases: $509 million
Non-current long-term debt: $5,439 million
Non-current part of leases: $999 million
With this information, we can calculate the short-term financial debt (CL) and long-term financial debt (NCL):
Short-term financial debt (CL) = $1,207 million + $509 millionCL = $1,716 million
Long-term financial debt (NCL) = $5,439 million + $999 millionNCL = $6,438 million
Finally, we can calculate Tesla Motors' net financial debt (NFD) using the following formula:
Net Financial Debt (NFD) = $1,716 million + $6,438 million - $16,065 millionNFD = -$7,911 million
Since Tesla Motors has a negative net financial debt, it is in a strong position to acquire more interest-bearing debt and sustain its growth.