How do I calculate net debt?

If you need to calculate the net debt or the total amount of the debt it does, you can do so with a basic formula that requires three factors. Short -term debt is any law against business that must be paid for less than a year. Long-term debt, such as loans or mortgages, includes any accounts that can be paid to one or more year-digits that are usually higher than a short-term debt but not always. Money and liquid assets or any assets that can be quickly turned into money are the funds that the company currently has; When you calculate net debt, it is against the debt. While the company can consider it useful, investors commonly use this formula. This includes all accounts or liabilities that must be paid within one year, including supplies, inventory expenses and normal operating costs. One should only take into account the current short -term debt of the company, not the future COSTS, into the calculation. Long -term debt that normally comes from loans, mortgages and conditionEb projects. As with short -term debt, these numbers should be added together.

The next step is to find out how much money the company has to pay these debts by adding current assets. Such assets such as stocks or sales reserves can be quickly turned into money. In this calculation, "money" is simply the amount of free funds available to the company to pay debt.

Short -term debt and long -term debt should be added to obtain a full amount of the company's current debt. Then the money and assets should be deducted with a full debt for calculation of net debt. When you calculate net debt, obtaining a negative number is good. For example, if the total debt amount is $ 50,000 in the US (USD) and money is $ 60,000, then the net debt is -10,000 USD. This means that the enterprise would be $ 10,000 if all debts were called.

While this formula canTo be useful for the company, most people count clean debt because they are investors. Knowledge of net debt and the trend of the company's debt gives you a metric that you can measure how well the business uses its money and manages its debt. If business has a positive net debt for several years, it may mean that business could be folded at any time and it may not be a safe investment.