Shares of Walmart’s Inc. WMT increased by 7.74% over the past three months. Before understanding the importance of debt, let’s take a look at how much debt Walmart has.
Walmart’s Debt
According to Walmart’s latest financial statement released on September 2, 2022, total debt stands at $50.70 billion, with $34.22 billion in long-term debt and $16.48 billion in current debt. After adjusting for $13.92 billion in cash equivalents, the company has net debt of $36.78 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.
To understand how leveraged a company is, investors look at the debt-to-equity ratio. Considering Walmart’s total assets of $247.20 billion, the debt-to-equity ratio is 0.21. Generally, a debt ratio greater than 1 indicates that a considerable part of the debt is financed by assets. A higher debt-to-equity ratio may also imply that the company could be at risk of default if interest rates were to rise. However, debt ratios vary widely from industry to industry. A debt ratio of 35% may be higher for one industry, but average for another.
Why Debt Matters
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.
However, due to interest payment obligations, a company’s cash flow can be affected. 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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