Over the past three months, shares of Coca-Cola’s Inc. KO down 5.66%. Before we understand the importance of debt, let’s take a look at how much debt Coca-Cola has.
Coca-Cola’s debt
According to Coca-Cola’s most recent balance sheet released on October 26, 2022, total debt stands at $39.59 billion, with $35.46 billion in long-term debt and $4.12 billion in current debt. After adjusting for $10.13 billion in cash equivalents, the company has net debt of $29.46 billion.
Let’s define some of the terms we used in the paragraph above. Current debt is the part of a company’s debt that is due within one year, while long-term debt is the portion due for more than one year. Cash equivalents includes cash and all liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.
Investors look at the debt-to-equity ratio to understand a company’s financial leverage. Coca-Cola has total assets of $92.47 billion, bringing the debt ratio to 0.43. Generally speaking, a debt ratio greater than 1 means that a large part of the debt is financed by assets. As the debt-to-equity ratio increases, the risk of loan default also increases if interest rates were to rise. Different industries have different tolerance thresholds for debt ratios. For example, a debt ratio of 35% may be higher for one industry, but normal for another.
Debt size
Besides equity, debt is an important factor in a company’s capital structure and contributes to its growth. Due to its lower cost of funding than equity, it becomes an attractive option for executives trying to raise capital.
Interest payment obligations can impact the company’s cash flow. Equity holders can retain excess profits, generated by debt capital, when companies use debt capital for their business operations.
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This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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