Qualcomm's Debt Overview

Qualcomm's Debt Overview

Over the past three months, shares of Qualcomm Inc. QCOM decreased by 4.80%. When understanding a companies price change over a time period like 3 months, it could be helpful to look at its financials. One key aspect of a companies financials is its debt, but before we understand the importance of debt, let's look at how much debt Qualcomm has.

Qualcomm Debt

According to the Qualcomm's most recent financial statement as reported on November 2, 2022, total debt is at $15.48 billion, with $13.54 billion in long-term debt and $1.95 billion in current debt. Adjusting for $2.77 billion in cash-equivalents, the company has a net debt of $12.71 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 includes 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. Qualcomm has $49.01 billion in total assets, therefore making the debt-ratio 0.32. As a rule of thumb, a debt-ratio more than 1 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, but average for another.

Why Shareholders Look At Debt?

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.

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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This article was generated by Benzinga's automated content engine and reviewed by an editor.

Posted In: BZI-DebtNewsIntraday UpdateMarkets