Market Overview

Boston Scientific's Debt Overview

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Shares of Boston Scientific Inc. (NYSE: BSX) moved higher by 7.76% in the past three months. Before we understand the importance of debt, let's look at how much debt Boston Scientific has.

Boston Scientific's Debt

Based on Boston Scientific’s financial statement as of May 6, 2020, long-term debt is at $9.33 billion and current debt is at $1.00 billion, amounting to $10.34 billion in total debt. Adjusted for $370.00 million in cash-equivalents, the company's net debt is at $9.96 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. Boston Scientific has $30.11 billion in total assets, therefore making the debt-ratio 0.34. 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. 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.

However, interest-payment obligations can have an adverse impact on the cash-flow of the company. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

 

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