Wednesday, January 4, 2017

Now that we’re all settling into 2017, Calcbench thought we would open the new year with a quick look at corporate debt levels. With interest rates likely to rise for the first time in years and tax reform on the agenda (with at least some people talking about changing the tax deductibility of interest expenses), it’s an easy place to start.

First, we pulled together a sample population of all corporate filers with $200 million or more in annual revenue. Then we compared annual revenue to long-term debt, and cash to short-term debt, for 2011 through 2015.

Revenue growth and long-term debt have see-sawed back and forth in relation to each other over the last five years; see Figure 1, below. The two lines moved in synch with each other for 2011 and 2012, and then diverged substantially when long-term debt dropped in 2013 and revenue rose in 2014. Then the two began to narrow again in 2015. (We won’t have useful 2016 numbers until later this quarter.)

Cash and short-term debt, in Figure 2 below, tell a better story. Short-term debt began dropping sharply in 2013, which more than offset a downward trend in cash piles that emerged in 2014. So odds are most public filers aren’t going bankrupt any time soon.

Within S&P 500

Our look at all filers with $200 million or more in revenue encompassed more than 8,200 entities. To focus our mind on Corporate America, we also ran the same comparisons for the S&P 500 alone.

Revenue and long-term debt tell roughly the same story within the S&P 500 as we saw for all filers. (See Figure 3, below.) With cash and short-term debt (Figure 4), large companies actually had less cash on hand in the early 2010s and then improved markedly, similar to what we saw with the larger population above.

What else should Calcbench be studying here? Always feel free to let us know at

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