Angie · learn

Total debt

Short-term plus long-term borrowings, before any cash is netted off.

Updated 2026-09-03

Total debt is everything the company has borrowed, short-term and long-term. It does two jobs in a valuation, and they pull in opposite directions.

  • It reduces what shareholders own, because lenders are paid first. Debt is subtracted in the bridge from enterprise value to equity value via net debt.
  • It can lower the discount rate, because debt is usually cheaper than equity and interest is tax-deductible. See cost of debt and wacc.

That second effect is why a moderately levered company can carry a lower cost of capital than a debt-free one, and why the model has to be careful. A heavily indebted business borrowing cheaply blends down to a rate that barely discounts near-term cash, which would manufacture a false bargain out of nothing but leverage. Angie floors the blended rate at 6 percent for that reason.

For a manufacturer running its own lending arm, most of the reported debt funds a book of customer loans rather than the factory. Treating it as industrial leverage understates the shares. Angie approximates industrial net debt for those companies and marks every such row low confidence, because there is no clean segment split in the data.

See also

  • Net debt — Positive means a net borrower, negative means net cash. Subtracted from enterprise value to reach what shareholders own.
  • Cost of debt — The implied interest rate the company actually pays. Applied after the tax shield in the WACC, because interest is tax-deductible and equity dividends are not.
  • Cash — Cash, equivalents and short-term investments. Netted against debt to bridge the value of the business to the value of the shares.

← See this one in the deck

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.

IsiofiaIsiofia