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Over the past three months, shares of LyondellBasell Industries Inc. LYB<\/span> rose by 6.94%. Before having a look at the importance of debt, let’s look at how much debt LyondellBasell Industries has.<\/p>\n Based on LyondellBasell Industries’s financial statement as of October 28, 2022, long-term debt is at $10.45 billion and current debt is at $871.00 million, amounting to $11.32 billion in total debt. Adjusted for $1.48 billion in cash-equivalents, the company’s net debt is at $9.84 billion.<\/p>\n Let’s define some of the terms we used in the paragraph above. Current debt<\/strong> is the portion of a company’s debt which is due within 1 year, while long-term debt<\/strong> is the portion due in more than 1 year. Cash equivalents<\/strong> includes cash and any liquid securities with maturity periods of 90 days or less. Total debt<\/strong> equals current debt plus long-term debt minus cash equivalents.<\/p>\n To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering LyondellBasell Industries’s $36.49 billion in total assets, the debt-ratio is at 0.31. 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. A debt ratio of 35% might be higher for one industry, but average for another.<\/p>\n 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.<\/p>\n Interest-payment obligations can impact 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.<\/p>\n Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform which provides investors with near-instantaneous access to dozens of stock metrics – including debt-to-equity ratio. Click here to learn more<\/a>.<\/p>\nLyondellBasell Industries Debt<\/h2>\n
Importance of Debt<\/h2>\n