Kohl's's Debt Overview

Shares of Kohl's KSS moved higher by 95.35% in the past three months. Before having a look at the importance of debt, let us look at how much debt Kohl's has.

Kohl's's Debt

Based on Kohl's’s balance sheet as of December 3, 2020, long-term debt is at $3.85 billion and current debt is at $127.00 million, amounting to $3.98 billion in total debt. Adjusted for $1.94 billion in cash-equivalents, the company's net debt is at $2.04 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 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 Kohl's’s $15.44 billion in total assets, the debt-ratio is at 0.26. 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.

Why Shareholders Look At Debt?

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.

Interest-payment obligations can impact 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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