A Look Into Marriott Intl's Debt

Over the past three months, shares of Marriott Intl's Inc. MAR fell by 1.28%. Before having a look at the importance of debt, let's look at how much debt Marriott Intl's has.

Marriott Intl's Debt

Based on Marriott Intl's's financial statement as of November 3, 2022, long-term debt is at $8.86 billion and current debt is at $558.00 million, amounting to $9.42 billion in total debt. Adjusted for $1.04 billion in cash-equivalents, the company's net debt is at $8.37 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. Marriott Intl's has $24.76 billion in total assets, therefore making the debt-ratio 0.38. 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. For example, a debt ratio of 25% might be higher for one industry, but normal for another.

Why Debt Is Important

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.

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.