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debt load
Definition of debt load
: the amount of money that someone owes
Indulge Your Inner Word Nerd
Word by Word Definitions
: sin, trespass
: something owed : obligation
: a state of being under obligation to pay or repay someone or something in return for something received : a state of owing
: the quantity that can be carried at one time by a specified means
: whatever is put on a person or pack animal to be carried : pack
: whatever is put in a ship or vehicle or airplane for conveyance : cargo
: to put a load in or on
: to place in or on a means of conveyance
: to encumber or oppress with something heavy, laborious, or disheartening : burden
Financial Definition of DEBT LOAD
debt load
What It Is
Debt load is the total amount of debt that a company has on its balance sheet. All publicly traded companies must file financial statements, including balance sheets, every quarter.
How It Works
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.
To learn more about why knowing a company's debt load is so vital to successful investing, check out The One Key Financial Statistic You Must Know.
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