Net debt

Definition

A company's total interest-bearing debt minus its cash and cash equivalents, the figure that bridges a business's enterprise value to the equity price a buyer pays.

Why It Matters

In a cash-free, debt-free deal the seller keeps the cash and clears the debt at closing, so net debt is what turns an agreed enterprise value into what actually changes hands. A buyer who overlooks it can settle on a headline price and then be surprised by a materially different equity check once the balance sheet is trued up.

In numbers: A business with a $5M enterprise value carrying $1.2M of debt and $300k of cash has $900k of net debt, so the equity price works out to about $4.1M.