Net Debt

Enterprise Value equals Equity Value plus Net Debt (plus minority interest and preferred stock, minus associates). If you use gross debt instead of net debt, you overstate EV and make the company look more expensive than it is. Net Debt is also central to credit analysis: a company with $1B of debt but $900M of cash is in a fundamentally different position than one with $1B of debt and $50M of cash, even though gross leverage is identical.

Total Debt includes short-term borrowings, current portion of long-term debt, long-term debt, capital lease obligations, and sometimes other debt-like items (e.g., pension deficits). Cash & Cash Equivalents includes cash on hand, money market funds, and highly liquid short-term investments. Some analysts also include short-term investments or marketable securities in the cash figure if they are readily convertible.

Gross debt tells you total obligations; net debt tells you obligations after using available liquidity. In LBO models, net debt is used to determine the equity check (the amount the sponsor must fund). In trading comps, Net Debt / EBITDA is a cleaner leverage metric than Gross Debt / EBITDA because it accounts for balance sheet cash. Companies with large cash balances (e.g., tech firms) can have very low or even negative net debt.