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Shares of Ford Motor Inc. F down 4.99% over the past three months. Before looking at the importance of debt, let’s look at how much debt Ford Motor has.
Ford Motor debt
Based on Ford Motor’s financial statement on October 27, 2022, long-term debt is at $84.28 billion and current debt is at $44.05 billion, accounting for $128.33 billion in total debt. Adjusted for $21.55 billion in cash equivalents, the company’s net debt stood at $106.78 billion.
Let’s define some of the terms we used in the paragraph above. Current debt is the portion of the company’s debt due in 1 year, while long term debt is the portion due in more than 1 year. Cash equivalents including cash and any liquid securities with maturity periods of 90 days or less. Total debt equal to current debt plus long-term debt minus cash equivalents.
Shareholders look at the debt ratio to understand how much financial leverage a company has. Ford Motor has $246.92 billion in total assets, therefore the debt ratio becomes 0.52. As a general rule, a debt ratio greater than 1 indicates that a large portion of the debt is financed by assets. A higher debt ratio may also indicate that the company may be putting itself at risk for default, if interest rates rise. However, debt ratios vary widely across industries. For example, a debt ratio of 40% may be higher for one industry, but normal for another.
Why Debt Matters
Debt is an important factor in a company’s capital structure, and it can help achieve growth. Debt typically has a relatively lower cost of financing than equity, making it an attractive option for executives.
However, interest payment obligations can have an adverse effect on the company’s cash flow. Equity owners can keep excess profits, generated from debt capital, when companies use debt capital for its business operations.
Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform that gives investors near-instant access to dozens of stock metrics – including the debt-to-equity ratio. Click here to learn more.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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