Definition

Net Borrowings is a line item on a company's cash flow statement that tracks aggregated totals of its short-term and long-term debt minus total cash. It can also be stated that net borrowings is the total amount that would still be owed if the company were to spend all of its cash to pay off all of its debts.

Calculation

Net Borrowings = Total Debt - Total Cash

Why it is important

Net borrowings can help understand a company's financial health. Specifically, if a company's net borrowings are higher than its total cash flow could indicate that the company is relying heavily on debt to keep the business running. For newer companies this is not uncommon, however if net borrowings continue to rise and stay higher than generated revenue for multiple reporting periods could be a sign that the company is not financially sound.