Market Overview

Baidu's Debt Overview

Share:

Over the past three months, shares of Baidu (NASDAQ: BIDU) increased by 19.44%. Before having a look at the importance of debt, let us look at how much debt Baidu has.

Baidu's Debt

According to the Baidu’s most recent balance sheet as reported on March 15, 2018, total debt is at $6.70 billion, with $5.50 billion in long-term debt and $1.19 billion in current debt. Adjusting for $1.70 billion in cash-equivalents, the company has a net debt of $4.99 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.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Baidu’s $38.69 billion in total assets, the debt-ratio is at 0.17. 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 25% might be higher for one industry and 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.

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.

Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform which provides investors with near-instantaneous access to dozens of stock metrics - including debt-to-equity ratio. Click here to learn more.

 

 

Related Articles (BIDU)

View Comments and Join the Discussion!

Posted-In: Debt InsightsEarnings News Intraday Update Markets