Market Overview

Twitter: Debt Overview


Shares of Twitter (NYSE: TWTR) increased by 48.02% in the past three months. Before having a look at the importance of debt, let us look at how much debt Twitter has.

Twitter's Debt

According to the Twitter’s most recent financial statement as reported on August 3, 2020, total debt is at $3.43 billion, with $3.43 billion in long-term debt and $7.25 million in current debt. Adjusting for $3.11 billion in cash-equivalents, the company has a net debt of $322.15 million.

Investors look at the debt-ratio to understand how much financial leverage a company has. Twitter has $12.55 billion in total assets, therefore making the debt-ratio 0.27. As a rule of thumb, a debt-ratio more than one 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. A debt ratio of 35% might be higher for one industry and 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. 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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