What Does Kimberly-Clark's Debt Look Like?

Over the past three months, shares of Kimberly-Clark Inc. KMB increased by 7.82%. 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 Kimberly-Clark has.

Kimberly-Clark Debt

Based on Kimberly-Clark's balance sheet as of October 25, 2022, long-term debt is at $7.63 billion and current debt is at $959.00 million, amounting to $8.59 billion in total debt. Adjusted for $362.00 million in cash-equivalents, the company's net debt is at $8.22 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.

Investors look at the debt-ratio to understand how much financial leverage a company has. Kimberly-Clark has $17.84 billion in total assets, therefore making the debt-ratio 0.48. 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. For example, a debt ratio of 35% might be higher for one industry, but normal 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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This article was generated by Benzinga's automated content engine and reviewed by an editor.