What is defined as net debt?

Net debt is defined as total debt minus cash on the balance sheet. This metric provides a more accurate picture of a company's financial leverage and overall debt situation by taking into account the cash available to pay off liabilities. By subtracting cash and cash equivalents from total debt, net debt helps assess how much debt an organization would have if it used its cash to reduce its obligations.

For instance, if a company has a substantial amount of cash reserves, its effective debt burden is much lower than the gross debt figure suggests. This calculation is particularly useful for investors and analysts as it reflects a company's liquidity position and ability to service debt, leading to better credit assessments and investment decisions.

The other options do not accurately represent net debt: the second option combines liabilities and cash without performing the necessary subtraction, while the third option describes a specific obligation rather than a broader debt measure. The final option focuses on equity metrics, which are unrelated to debt calculations.