Angie · learn
Net debt
Positive means a net borrower, negative means net cash. Subtracted from enterprise value to reach what shareholders own.
Updated 2026-09-03
How it is calculated
Net debt = total debt − cash
Net debt is total borrowings minus cash. It answers a narrow question: if the company used every dollar it holds to pay down what it owes, how much would be left. A positive figure means a net borrower, a negative figure means the company holds more cash than debt.
net debt = total debt − cash and equivalents
Subtracted from enterprise value to reach equity value. A negative net debt therefore ADDS to what shareholders own.
Why it belongs in the bridge
A DCF values the operating business. It does not value the bank account, and it does not account for the fact that lenders are paid first. Net debt handles both in one step. Cash the company already holds is real value that the projection never counted, so it is added back. Debt is a prior claim on the cash the projection did count, so it is removed.
Both on 2026-09-05. Amazon's net cash position adds $21B to what shareholders own; Verizon's borrowings remove $139B.
Where the simple version is wrong
For a manufacturer that runs its own lending arm, the reported debt funds a book of customer loans rather than the factory. Treating it as industrial leverage understates what the shares are worth. Angie approximates industrial net debt for those companies by netting an estimate of the finance book against the debt, and marks every such row low confidence, because there is no clean segment split in the available data.
See also
- Enterprise value — The value of the whole operating business, before asking who has a claim on it. Debt holders are paid before shareholders, so this is not yet what the shares are worth.
- Equity value — What is left for shareholders once the lenders have been paid.
- Total debt — Short-term plus long-term borrowings, before any cash is netted off.
- Net-debt override — Sets net debt by hand. Mostly used to supply industrial-only debt for a manufacturer whose in-house lending arm inflates the reported figure.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
