Market Overview

A Look Into Philip Morris's Debt

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Shares of Philip Morris Intl Inc. (NYSE: PM) increased by 3.16% in the past three months. Before we understand the importance of debt, let's look at how much debt Philip Morris Intl has.

Philip Morris Intl's Debt

According to the Philip Morris Intl’s most recent balance sheet as reported on April 28, 2020, total debt is at $28.37 billion, with $25.00 billion in long-term debt and $3.37 billion in current debt. Adjusting for $3.75 billion in cash-equivalents, the company has a net debt of $24.62 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. Philip Morris Intl has $37.49 billion in total assets, therefore making the debt-ratio 0.76. 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. A debt ratio of 40% might be higher for one industry, whereas average for another.

Why Investors Look At Debt?

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.

However, interest-payment obligations can have an adverse impact on 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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