Market Overview

A Look Into ViacomCBS's Debt

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Shares of ViacomCBS Inc. (NASDAQ: VIAC) rose by 48.32% in the past three months. Before having a look at the importance of debt, let's look at how much debt ViacomCBS has.

ViacomCBS's Debt

Based on ViacomCBS’s balance sheet as of August 6, 2020, long-term debt is at $19.70 billion and current debt is at $364.00 million, amounting to $20.07 billion in total debt. Adjusted for $2.29 billion in cash-equivalents, the company's net debt is at $17.78 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. ViacomCBS has $51.19 billion in total assets, therefore making the debt-ratio 0.39. 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 40% might be higher for one industry, whereas normal for another.

Why Investors 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.

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.

 

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