A Look Into Intel's Debt

Over the past three months, shares of Intel Inc. INTC moved higher by 6.51%. Before having a look at the importance of debt, let's look at how much debt Intel has.

Intel Debt

Based on Intel's financial statement as of April 28, 2023, long-term debt is at $48.84 billion and current debt is at $1.44 billion, amounting to $50.27 billion in total debt. Adjusted for $8.23 billion in cash-equivalents, the company's net debt is at $42.04 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, shareholders look at the debt ratio. Considering Intel's $185.30 billion in total assets, the debt-ratio is at 0.27. 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 25% might be higher for one industry, but average for another.

Why Shareholders Look At 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.

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.