Net Debt to Market Cap

What is the definition of Net Debt / Price?

This is the ratio of Net Debt to the Market Capitalisation of the company. This ratio Is negative if the company has net debt and positive if it has net cash. This will be based on the latest financial statements and it's important to be aware of post-balance sheet event that may have reduced the cash balance, e.g. an acquisition.


Stockopedia explains Net Debt / Price...

This measure gives a sense of how indebted a company is relative to its market value. Many companies are valued on the basis of their Enterprise Value, which incorporates debt. If the valuation moves suddenly, the only portion of the EV which can quickly revalue is the Equity portion. Thus, companies which have a high debt to market capitalisation ratio can be volatile, especially if trading is difficult.

Like all financial ratios, a company's debt ratio should be compared with industry peers but, generally, a ratio higher than 0.5x would be considered high.

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