What Does Lumen Technologies's Debt Look Like?

Shares of Lumen Technologies Inc. LUMN decreased by 29.96% in the past three months. Before having a look at the importance of debt, let's look at how much debt Lumen Technologies has.

Lumen Technologies's Debt

Based on Lumen Technologies's balance sheet as of August 3, 2022, long-term debt is at $27.96 billion and current debt is at $409.00 million, amounting to $28.37 billion in total debt. Adjusted for $360.00 million in cash-equivalents, the company's net debt is at $28.01 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.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Lumen Technologies has $57.67 billion in total assets, therefore making the debt-ratio 0.49. As a rule of thumb, a debt-ratio more than 1 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. For example, a debt ratio of 40% might be higher for one industry, but 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.

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.