Market Overview

Walt Disney's Debt Overview


Over the past three months, shares of Walt Disney Inc. (NYSE: DIS) increased by 12.33%. Before having a look at the importance of debt, let's look at how much debt Walt Disney has.

Walt Disney's Debt

Based on Walt Disney’s balance sheet as of May 5, 2020, long-term debt is at $42.77 billion and current debt is at $12.68 billion, amounting to $55.45 billion in total debt. Adjusted for $14.34 billion in cash-equivalents, the company's net debt is at $41.11 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. Walt Disney has $206.29 billion in total assets, therefore making the debt-ratio 0.27. As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. For example, a debt ratio of 25% might be higher for one industry, whereas normal for another.

Why Debt Is Important

Debt is an important factor in the capital structure of a company, and can help it attain growth. Debt usually has a relatively lower financing cost than equity, which makes it an attractive option for executives.

Interest-payment obligations can impact the cash-flow of the company. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.


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