Shares of Abbott Laboratories (NYSE:ABT) moved lower by 6.46% in the past three months. Before we understand the importance of debt, let us look at how much debt Abbott Laboratories has.

Abbott Laboratories's Debt

According to the Abbott Laboratories's most recent balance sheet as reported on May 5, 2021, total debt is at $18.44 billion, with $17.49 billion in long-term debt and $955.00 million in current debt. Adjusting for $8.05 billion in cash-equivalents, the company has a net debt of $10.39 billion.

Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents include cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

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, due to interest-payment obligations, cash-flow of a company can be impacted. 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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