SLB Inc. shares of SLB There was an increase of 6.37% in the last three months. Before taking a look at the importance of debt, let us see how much debt SLB has.
Based on SLB’s financial statement as of January 25, 2023, long-term debt is $10.59 billion and current debt is $1.63 billion, totaling $12.23 billion in debt. Adjusted for $1.66 billion in cash-equivalents, the company’s net debt is $10.57 billion.
Let us define some of the terms we have used in the above paragraphs. current loan is the portion of the debt of a company which is payable within 1 year, while long term debt Part payable in more than 1 year. cash equivalents Includes cash and any liquid securities with a maturity of 90 days or less. total debt Current debt is equal to long-term debt minus cash equivalents.
To understand a company’s degree of financial leverage, investors look at the debt ratio. Considering SLB’s total assets of $43.13 billion, the debt-ratio stands at 0.28. As a rule of thumb, a debt-to-equity ratio greater than 1 indicates that a large portion of the debt is financed by assets. A high debt-to-equity ratio can also mean that the company may be putting itself at risk for default if interest rates rise. However, debt ratios vary widely among different industries. A debt ratio of 35% may be high for one industry, but average for another.
Why do investors look at debt?
In addition to equity, debt is an important factor in a company’s capital structure, and contributes to its growth. Due to its lower funding cost compared to equity, it becomes an attractive option for executives trying to raise capital.
However, interest payment obligations can have an adverse effect on a company’s cash flow. Having financial leverage allows companies to access additional capital for business operations, allowing equity owners to retain additional profits generated by debt capital.
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This article was generated by Benzinga’s automated content engine and reviewed by an editor.