What it is:
How it works/Example:
Let's look at a copy of Apple's balance sheet as compiled by Yahoo! Finance:
We can see that as of September 26, 2009, Apple had a debt load (the Total Liabilities line item) of almost $15.9 billion.
Why it Matters:
Companies carry debt for any number of reasons, and looking at debt load in and of itself may not be very useful. In most cases, you want to look at debt load relative to another measure, like equity, cash flow or total assets.
Many analysts look at a company's debt ratio to gauge its financial health. You can calculate the debt ratio by dividing Total Debt by Total Assets. Apple's debt ratio as of September 26, 2009 was $15.9 billion / $47.5 billion = 33.5%. This tells us that only 33.5% of Apple's assets are financed with debt.