Net Debt (%)
Net Debt = Net Indebtedness/Total assets Net Debt = interest-bearing liabilities-cash-short-term investments.
Net Indebtedness shows how much interest-bearing liability there is in the company in relation to its total assets. This shows whether the company can settle its debts in the short term.
This key figure is used to see the company's interest rate sensitivity and financial risk. Low or negative Net Debt is good.
If the company has more assets than liabilities, the net debt will be negative. Negative value means that the company can pay off its debts and still have liquid funds for new investments.
Some industries (e.g. real estate, oil & gas, shipping) with a high degree of borrowing often have high Net Debt. Always compare with companies within the same industry.
Things to keep in mind
- Low or Negative Net Debt is good.
- A negative value is positive because the company's interest-bearing assets then exceed its interest-bearing liabilities.