Chesapeake Energy's Debt Overview

Over the past three months, shares of Chesapeake Energy Inc. CHK moved higher by 4.59%. Before having a look at the importance of debt, let's look at how much debt Chesapeake Energy has.Chesapeake Energy DebtBased on Chesapeake Energy's financial statement as of November 1, 2022, long-term debt is at $2.72 billion and current debt is at $40.00 million, amounting to $2.76 billion in total debt.

Adjusted for $74.00 million in cash-equivalents, the company's net debt is at $2.68 billion.Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents includes cash and any liquid securities with maturity periods of 90 days or less.

Total debt equals current debt plus long-term debt minus cash equivalents.To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Chesapeake Energy's $14.09 billion in total assets, the debt-ratio is at 0.2. Generally speaking, a debt-ratio more than 1 means that a large portion of debt is funded by assets.

As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. For example, a debt ratio of 35% might be higher for one industry, but normal for another.Importance of DebtDebt is an important factor in the capital structure of a company, and can help it attain growth.

Debt usually has a relatively lower financing cost than equity, which makes it an attractive option for executives.However, due to interest-payment obligations, cash-flow of a company can be impacted. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform which provides investors with near-instantaneous access to dozens of stock metrics - including debt-to-equity ratio. Click here to learn more.This article was generated by Benzinga's automated content engine and reviewed by an editor.