What is Total Debt Issued?
291 reads · Last updated: December 5, 2024
Total Debt Issued refers to the total amount of funds raised by a company during a specific accounting period through the issuance of debt instruments (such as bonds, loans, etc.). This item reflects the total amount of new debt financing obtained by the company during that period to support its operations, investments, or other financial needs.
Definition
Debt financing refers to a company's method of raising funds by issuing debt instruments such as bonds and loans. The total amount of debt issued, as reflected in the cash flow statement, indicates the total new debt financing obtained by the company during that period to support its operations, investments, or other financial needs.
Origin
The concept of debt financing dates back to ancient times when governments and merchants borrowed funds to finance wars and trade activities. With the development of financial markets, debt financing evolved into a crucial method for modern corporate financing, particularly during the 19th-century Industrial Revolution, when companies issued bonds to raise large-scale funds for expansion.
Categories and Features
Debt financing is primarily categorized into short-term and long-term debt. Short-term debt typically matures within a year and is used to meet a company's working capital needs, such as commercial paper. Long-term debt includes debt instruments with maturities exceeding one year, like corporate bonds, suitable for long-term investment projects. The advantage of debt financing is the ability to quickly obtain funds without diluting shareholder equity, but it also increases financial leverage and interest burdens.
Case Studies
A typical example is Apple Inc.'s first bond issuance in 2013, raising $17 billion to fund stock buybacks and dividend payments. This debt financing allowed Apple to optimize its capital structure without using overseas cash reserves. Another example is Tesla Inc., which raised over $2 billion in 2020 through convertible bond issuance to support the development and production expansion of its new models.
Common Issues
Common issues investors face when analyzing a company's debt financing include assessing the sustainability of the debt and its impact on the company's financial health. A common misconception is that all debt is detrimental, but in reality, moderate debt can help a company achieve growth and expansion.
