In the last three months shares of apple inc. AAPL down 9.51%. Before we look at what debt means, let’s look at how much debt Apple has.

Apple’s debt

According to Apple’s latest financial report, released on July 29, 2022, the total debt is $119.69 billion, of which $94.70 billion is long-term debt and $24.99 billion is current Debts. Adjusted for $27.50 billion in cash, the company has net debt of $92.19 billion.

Let’s define some of the terms we used in the paragraph above. Current Debt is that portion of a company’s debt that falls due within one year, during Long-term liabilities is the portion due in more than 1 year. cash equivalents includes cash and all liquid securities with maturities of 90 days or less. total debt equals current liabilities plus non-current liabilities minus cash equivalents.

To understand a company’s level of financial leverage, shareholders look at the leverage ratio. Considering Apple’s total assets of $336.31 billion, the debt ratio is 0.36. As a rule of thumb, a debt ratio greater than 1 indicates that a significant portion of the debt is funded by assets. A higher leverage ratio can also mean that the company faces default risk if interest rates rise. However, leverage ratios vary widely across different industries. A debt ratio of 25% may be higher for one industry but average for another.

meaning of debt

Debt is an important factor in a company’s capital structure and can contribute to growth. Debt typically has a relatively lower funding cost than equity, making it an attractive option for executives.

Interest payment obligations may affect the company’s cash flow. Financial leverage also allows companies to use additional capital to operate the business, allowing equity investors to retain excess profit generated by the leverage.

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