Before that, we already talked about the threat of rising interest rates for companies with excessive debt overload., Now let's make a typical debt load rating. We will evaluate by NetDebt / EBITDA, because, that it is more common.
In such an article, NetDebt and EBITDA were calculated as follows:
- NetDebt = Long Debt + Little Debt - Cash and Equivalents (cache).
- EBITDA = Operating income + Depreciation and amortization.
In the article, a long debt and a small debt are not necessarily the same, what is designated as short-term debt and long-term debt in the financial report. This also includes senior notes, unsecured debt, real estate mortgages (mortgages) etc.. Moreover, some companies may include cash and equivalents and short-term investments in various report items as part of currency equivalents.. Short-term investments were added to the cache to compile the rating.
In March 2021 r. not all companies have submitted reports for 2020 fiscal year. To bring statistics "to one denominator", for lagging companies, depreciation and operating income were linearly extrapolated, but the characteristics of the balance (cache, debts) used in calculations without changes. Companies with extrapolated data in the table are highlighted in bold.
Due to the above assumptions, the characteristics in the article may differ from the data from other sources..
Is considered, the lower the NetDebt / EBITDA ratio, the better for the company. If this ratio is negative, then we have a more suitable option: funds in the company's accounts are quite, to fully pay off all your debts. But in the table below, NetDebt / EBITDA is calculated purely on a technical level., therefore it is better to study the acquired value a little comprehensively.
For instance, if you blindly follow the rule “The less NetDebt / EBITDA, the better for the company ", then American Airlines may seem like the most reliable issuer. But detailed study indicates, that this company poses a huge danger to a potential financier: the activities of the airline at this time are operationally unprofitable, and there are not enough funds in the accounts even to pay off short-term obligations. For convenience, such "incidents" are highlighted in the "NetDebt / EBITDA" column in red. With all this, this example does not seek to compromise NetDebt / EBITDA. In addition, for convenience, in the columns "Operating profit" and "EBITDA" minus indicators are highlighted in red, and in "NetDebt" and "NetDebt / EBITDA" - green.
Rice. 1. Summary of debt characteristics of some US organizations. A source: EDGARRis. 1. Summary of debt characteristics of some US organizations. A source: EDGAR
At first glance it may seem, that Disney is in the greatest threat, KraftHeinz и BMS. But it’s not so. These companies are really very heavily credited., but with all this, the volume of the cache on their accounts is multiples of the size of short-term debt. Completely possible, that the low operating income of the leaders of the rating is temporary. Namely, Bristol Myers Squibb's operating losses linked to the acquisition of MioKardia.
If you comprehensively study the ratio of cash on accounts with the size of short-term debt, then subsequent companies will be at risk:
- NextEra Energy,
- Exxon Mobil,
- American Airlines.
Taking into account the business volumes of these four companies, doubtful, that some of them go broke. But difficulties with money can affect dividends and share price dynamics..