Comcast's Debt Overview

Over the past three months, shares of Comcast Inc. CMCSA moved higher by 24.83%. Before having a look at the importance of debt, let's look at how much debt Comcast has.

Comcast's Debt

Based on Comcast’s financial statement as of April 30, 2020, long-term debt is at $105.77 billion and current debt is at $2.97 billion, amounting to $108.74 billion in total debt. Adjusted for $8.52 billion in cash-equivalents, the company's net debt is at $100.23 billion.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Comcast’s $262.42 billion in total assets, the debt-ratio is at 0.41. 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 40% might be higher for one industry, whereas normal for another.

Why Investors Look At Debt?

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.

However, due to interest-payment obligations, cash-flow of a company can be impacted. 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.