A look at Kinder Morgan’s debt

Over the past three months, shares of Kinder Morgan (NYSE: KMI) fell 9.00%. Before understanding the importance of debt, let’s take a look at how much debt Kinder Morgan has.

Kinder Morgan Debt

Based on Kinder Morgan’s balance sheet as of July 27, 2020, long-term debt is $31.44 billion and current debt is $3.51 billion, for a total debt of $34.95 billion. dollars. Adjusted for $526.00 million in cash equivalents, the company’s net debt is $34.42 billion.

Shareholders look at the debt ratio to understand a company’s financial leverage. Kinder Morgan has total assets of $71.78 billion, bringing the debt ratio to 0.49. Generally speaking, a debt ratio greater than one means that a large part of the debt is financed by assets. As the debt-to-equity ratio increases, the risk of loan default also increases if interest rates were to rise. Different industries have different tolerance thresholds for debt ratios. A debt ratio of 25% may be higher for one industry and average for another.

Why Debt Matters

Debt is an important factor in a company’s capital structure and can help it achieve growth. Debt typically has a relatively lower cost of funding than equity, making it an attractive option for executives.

However, due to interest payment obligations, a company’s cash flow may be affected. Equity holders can retain excess profits, generated by debt capital, when companies use debt capital for their business operations.

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