A company’s debt, liabilities and risk are very important factors in understanding the company. Having an understanding of a company’s debt and liabilities is a key component in understanding the risk of a company, thus aiding in the decision to invest, not to invest, or to stay invested in a company. There are many metrics involved in understanding the debt of a company, but for this article, I will look at Honeywell International‘s (HON) total debt, total liabilities, debt ratios and WACC.
Through the above-mentioned four main metrics, we will understand more about the company’s debt, liabilities and risk. If this summary is compared with other companies in the same sector, you will be able see which has the most debt and the most risk.
1. Total Debt = Long-Term Debt + Short-Term Debt
A debt is an amount of money borrowed by one party from another, and must be paid back. Total debt is the sum of long-term debt, which is debt that is due in one year or more, and short-term debt, which is any debt that is due within one year.
- 2007 – $5.419 billion + $2.238 billion = $7.657 billion
- 2008 – $5.865 billion + $2.510 billion = $8.375 billion
- 2009 – $6.246 billion + $1.361 billion = $7.607 billion
- 2010 – $5.755 billion + $889 million = $6.654 billion
- 2011 – $6.881 billion + $674 million = $7.555 billion
Honeywell International’s total debt has decreased over the past five years.