Benzinga | Aug 10, 2020 08:50AM EDT

Marriott's Debt Overview

Over the past three months, shares of Marriott Intl Inc. (NASDAQ:MAR) increased by 17.22%. Before we understand the importance of debt, let's look at how much debt Marriott Intl has.

Marriott Intl's Debt

Based on Marriott Intl's balance sheet as of May 11, 2020, long-term debt is at $10.57 billion and current debt is at $1.66 billion, amounting to $12.23 billion in total debt. Adjusted for $1.76 billion in cash-equivalents, the company's net debt is at $10.47 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. Marriott Intl has $25.55 billion in total assets, therefore making the debt-ratio 0.48. As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. A debt ratio of 35% might be higher for one industry, whereas average for another.

Importance of Debt

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.

Interest-payment obligations can impact the cash-flow of the company. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.