United States Steel's Debt Overview

Shares of United States Steel X moved lower by 20.06% in the past three months. Before we understand the importance of debt, let us look at how much debt United States Steel has.

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United States Steel's Debt

According to the United States Steel's most recent balance sheet as reported on October 29, 2021, total debt is at $4.38 billion, with $4.27 billion in long-term debt and $113.00 million in current debt. Adjusting for $2.04 billion in cash-equivalents, the company has a net debt of $2.34 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.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. United States Steel has $17.33 billion in total assets, therefore making the debt-ratio 0.25. 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 average for another.

Why Debt Is Important

Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.

However, interest-payment obligations can have an adverse impact on the cash-flow of the company. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

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