Market Overview

Qualcomm's Debt Overview

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Shares of Qualcomm Inc. (NASDAQ: QCOM) rose by 33.72% in the past three months. Before having a look at the importance of debt, let's look at how much debt Qualcomm has.

Qualcomm's Debt

Based on Qualcomm’s balance sheet as of July 29, 2020, long-term debt is at $15.43 billion and current debt is at $500.00 million, amounting to $15.93 billion in total debt. Adjusted for $6.12 billion in cash-equivalents, the company's net debt is at $9.80 billion.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Qualcomm has $32.33 billion in total assets, therefore making the debt-ratio 0.49. 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 Shareholders 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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