How Does Exxon Mobil's Debt Look?

Over the past three months, shares of Exxon Mobil Inc. XOM fell by 8.65%. Before we understand the importance of debt, let's look at how much debt Exxon Mobil has.

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Exxon Mobil's Debt

Based on Exxon Mobil’s balance sheet as of May 6, 2020, long-term debt is at $31.86 billion and current debt is at $27.75 billion, amounting to $59.61 billion in total debt. Adjusted for $11.41 billion in cash-equivalents, the company's net debt is at $48.20 billion.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Exxon Mobil has $355.80 billion in total assets, therefore making the debt-ratio 0.17. 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 25% might be higher for one industry, whereas average for another.

Importance of 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.

Interest-payment obligations can impact 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.