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 Lowe’s Companies Inc.’s (LOW) total debt, total liabilities, debt ratios and WACC.
1. Total Debt = Long-Term Debt + Short-Term Debt
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 – $5.576 billion + $1.104 billion = $6.680 billion
- 2008 – $5.039 billion + $1.021 billion = $6.060 billion
- 2009 – $4.528 billion + $552 million = $5.080 billion
- 2010 – $6.537 billion + $36 million = $6.573 billion
- 2011 – $7.035 billion + $592 million = $7.627 billion
Lowe’s total debt has increased since 2007. In 2007, the company reported a total debt of $6.680 billion. In 2011, the company’s total debt increased to 7.627 billion. Over the past 5 years, Lowe’s total debt has increased by 14.18%.