Net cash or net debt? Reading a balance sheet in two minutes
How to tell whether a company has more cash than debt, and why the answer depends on the business.
The quick check
Take the cash and short-term investments on the balance sheet and subtract total debt (short-term plus long-term borrowings). A positive answer is a net cash position; a negative answer is net debt.
Debt is not automatically bad
Utilities, real estate companies and telecom operators borrow heavily by design: their income is steady and their assets last decades. For a young or cyclical company, the same amount of debt can be a real risk if earnings fall.
What matters is whether the business earns comfortably more than its interest bill in a bad year, and when the debt has to be repaid. Both are in the notes to the financial statements.
Watch the trend
A company that keeps adding debt to fund buybacks or dividends while cash flow stays flat is changing its risk profile, even if nothing else looks different yet.