Understand what net debt is


Net indebtedness is a particularly useful financial indicator for companies, since it allows to know the exact amount of debts of a company after deducting liquid assets. Focus on this notion that it is important to understand.
What is Net Debt?
Net debt is also called net financial debt or net financial debt. It is a question of having a global view of the debt ratio of a company without taking into account tax, supplier and social debts. That is to say, the net indebtedness relates to the bank financial liabilities and the current account contributions of the partners that must be repaid. It is therefore a particularly important financial indicator to know the good health of a company.
What is the method of calculating net indebtedness?
To calculate the net indebtedness of a company, one must have in its possession the balance sheet of the latter. Simply add the bank debts to the associated current accounts, and withdraw the cash and marketable securities (VMP)  to obtain the net financial debt of a company. This method of calculation is relatively simple and often quick to implement.
What is the use of net debt?
In accounting , net indebtedness is an essential factor because it will allow to calculate in part the leverage effect as well as certain financial ratios. We will thus be able to determine with precision the rate of indebtedness of the company and especially, its capacity of indebtedness : the latter is fundamental to know the level of solvency of a company. Net indebtedness will also reveal the repayment capacity of a company, as well as its self-financing capacity over the long term. So many accounting concepts that make it possible to know the good financial health of the company concerned.
Net debt is a decisive accounting concept that defines the overall level of financial health of a company.

Comments

Post a Comment

Popular posts from this blog

Accounting for the CVAE

Image
The CVAE, understand the Contribution on Value Added Companies , is a component of the CET (Economic Contribution Territoriale). For best accountancy training  Best school of accountancy In Pakistan .  This is a transaction that must be accounted for and depends on the turnover achieved. Return on the accounting of the CVAE .  The CVAE, what is it? Component of the Territorial Economic Contribution , the CVA is determined according to the realized turnover and the added value produced, over a year. It is due by the person who carries out the activity on the first of January of the current year, and who realizes more than 152 000 euros of turnover excluding tax. The CVAE, how to calculate it? The CVAE is calculated in a mathematical way, multiplying the value added at the progressive rate. It should be noted that the tax base is capped according to the turnover achieved over a year. Once defined, the CVAE must be accounted for and reported. But beware, only com...
Keep reading

Volunteering: the need for accounting valuation

Image
Because volunteering is essential to associative life and is a considerable economic issue ( estimated at close to one million full-time jobs in France), it can be considered as a resource. Valuing it in accounting is therefore sensible. What is Volunteering? In 1993 a report from the Economic and Social Council defined the volunteer as an individual who freely undertakes to conduct a non-salaried action outside his / her professional or family time. In other words, volunteering is "a gift of time freely given and free" . On the accounting side, the definition of volunteering is close: "voluntary contribution in kind which is without consideration". A volunteer can not receive remuneration and must not be subject to any subordination . The value of accounting valuation of volunteering Since volunteering does not generate financial flows , it is not systematically subject to an accounting valuation . However, it allows to account for the social utility ...
Keep reading

Declining depreciation and its role in accounting

Image
Certain goods used by those engaged in non-commercial activities may be subject to declining balance. For best accountancy training  Best school of accountancy In Pakistan .  It is a very specific calculation method of calculation which is of great interest to those who know how to calculate it! Zoom on the declining balance and its role in accounting ... What is degressive depreciation? The declining balance concerns taxpayers exercising a non-commercial profession : in some cases, their assets can be depreciated on a declining balance system . It is not a compulsory calculation system, but it may be of interest for some goods such as computer equipment, laboratory equipment, radiology equipment, cleaning machines for dental surgeons ... Some goods are excluded from the Such as passenger vehicles or second-hand goods, for example. How do you calculate degressive depreciation? The degressive amortization is decided on the first day of the acquisition of the propert...
Keep reading