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In valuation, net debt captures how much debt would remain after using readily available cash to pay it down. The standard way to define it is total debt minus cash (some definitions also subtract cash equivalents, but the essential point is that cash offsets debt). This matters because cash on hand can be used to reduce liabilities, so net debt better reflects a company’s true leverage than debt alone. In practice, net debt feeds into enterprise value: enterprise value equals equity value plus net debt, so higher net debt raises the overall value attributed to the firm’s obligations unless offset by cash. For example, if a company has 800 of debt and 200 of cash, net debt is 600; if it had 1000 of debt and no cash, net debt would be 1000; if cash exceeds debt, net debt can be negative, indicating net cash. The other options don’t match how leverage is measured: cash minus debt inverts the concept, equity minus debt corresponds to equity value rather than net debt, and revenue minus expenses reflects profit, not leverage.