A Look Into Walt Disney's Debt

A Look Into Walt Disney's Debt

Over the past three months, shares of Walt Disney Inc. DIS decreased by 11.54%. 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 Walt Disney has.

Walt Disney Debt

According to the Walt Disney's most recent financial statement as reported on November 29, 2022, total debt is at $48.37 billion, with $45.30 billion in long-term debt and $3.07 billion in current debt. Adjusting for $11.62 billion in cash-equivalents, the company has a net debt of $36.75 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.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Walt Disney's $203.63 billion in total assets, the debt-ratio is at 0.24. Generally speaking, a debt-ratio more than 1 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, but average for another.

Why Debt Is Important

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.

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

Posted In: BZI-DebtNewsIntraday UpdateMarkets