Broadcom Inc. shares of average There was an increase of 12.65% in the last three months. When looking to understand the change in prices of a company over a time period such as 3 months, it can be helpful to look at its financials. A major aspect of a company’s financial health is its debt, but before we delve into the importance of debt, let’s take a look at just how much debt Broadcom has.
As of December 16, 2022, Broadcom’s most recent balance sheet has total debt of $39.52 billion, consisting of $39.08 billion in long-term debt and $440.00 million in current debt. With an adjustment of $12.42 billion in cash-equivalents, the company has net debt of $27.10 billion.
Let us define some of the terms we have used in the above paragraphs. current loan is that part of a company’s debt that 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 Broadcom’s $73.25 billion in total assets, the debt-to-equity ratio stands at 0.54. Typically, a debt-to-income ratio greater than 1 means that a large portion of the debt is financed by assets. As the debt-to-income ratio increases, so does the risk of defaulting on loans when interest rates rise. Different industries have different tolerance limits for the debt-to-debt ratio. For example, a debt ratio of 40% may be high for one industry, but normal 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.