Market Overview

Twilio's Debt Overview


Shares of Twilio (NYSE: TWLO) rose by 43.99% in the past three months. Before we understand the importance of debt, let us look at how much debt Twilio has.

Twilio's Debt

Based on Twilio’s financial statement as of August 4, 2020, long-term debt is at $480.66 million and current debt is at $7.13 million, amounting to $487.80 million in total debt. Adjusted for $475.70 million in cash-equivalents, the company's net debt is at $12.10 million.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Twilio has $5.29 billion in total assets, therefore making the debt-ratio 0.09. 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 40% might be higher for one industry and normal for another.

Why Shareholders 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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