How Does Eastman Kodak's Debt Look Like?

Over the past three months, shares of Eastman Kodak Inc. KODK moved higher by 212.27%. Before we understand the importance of debt, let's look at how much debt Eastman Kodak has.

Eastman Kodak's Debt

Based on Eastman Kodak’s balance sheet as of May 12, 2020, long-term debt is at $111.00 million and current debt is at $2.00 million, amounting to $113.00 million in total debt. Adjusted for $209.00 million in cash-equivalents, the company's net debt is at $-96.00 million.

Investors look at the debt-ratio to understand how much financial leverage a company has. Eastman Kodak has $1.22 billion in total assets, therefore making the debt-ratio 0.09. Generally speaking, a debt-ratio more than 1 means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 40% might be higher for one industry, whereas average for another.

Why Debt Is Important

Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.

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.