Bristol-Myers Squibb's Debt Overview

Shares of Bristol-Myers Squibb BMY increased by 8.89% in the past three months. Before having a look at the importance of debt, let us look at how much debt Bristol-Myers Squibb has.

Bristol-Myers Squibb's Debt

According to the Bristol-Myers Squibb's most recent balance sheet as reported on October 27, 2021, total debt is at $44.74 billion, with $39.68 billion in long-term debt and $5.07 billion in current debt. Adjusting for $13.54 billion in cash-equivalents, the company has a net debt of $31.20 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.

Investors look at the debt-ratio to understand how much financial leverage a company has. Bristol-Myers Squibb has $110.89 billion in total assets, therefore making the debt-ratio 0.4. 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 normal for another.

Importance Of Debt

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.

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