How Does Sony's Debt Look?

Shares of Sony SNE increased by 1.01% in the past three months. Before having a look at the importance of debt, let us look at how much debt Sony has.

Sony's Debt

According to the Sony’s most recent balance sheet as reported on June 15, 2017, total debt is at $1.20 trillion, with $681.46 billion in long-term debt and $518.08 billion in current debt. Adjusting for $960.14 billion in cash-equivalents, the company has a net debt of $239.40 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. Sony has $17.66 trillion in total assets, therefore making the debt-ratio 0.07. Generally speaking, a debt-ratio more than one 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 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.

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.