Analysis of Debt
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- Income Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Total Debt (Carrying Amount)
Verizon Communications Inc., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Debt maturing within one year
- The debt maturing within one year shows a consistent upward trend over the five-year period. Starting at $5,889 million in 2020, it increases steadily each year, reaching $7,443 million in 2021, $9,963 million in 2022, and $12,973 million in 2023. By 2024, this short-term debt more than triples compared to 2020, rising sharply to $22,633 million. This indicates a significant increase in obligations due in the near term.
- Long-term debt, excluding maturing within one year
- The long-term debt excluding short-term maturities initially rises from $123,173 million in 2020 to a peak of $143,425 million in 2021. After this peak, it declines gradually to $140,676 million in 2022, $137,701 million in 2023, and decreases more noticeably to $121,381 million by 2024. This pattern suggests some reduction or refinancing of long-term liabilities in the latter years.
- Total short-term and long-term debt, including finance leases (carrying amount)
- The total debt, combining both short-term and long-term obligations, starts at $129,062 million in 2020 and increases to $150,868 million in 2021. It remains relatively stable around $150 billion in 2022 and 2023, with slight fluctuations ($150,639 million and $150,674 million, respectively). By 2024, a moderate decrease to $144,014 million is observed, reflecting the reduction in long-term debt notwithstanding the sharp rise in short-term debt.
- Overall insights
- The data reveal a notable shift in the composition of debt over the analyzed period. While total debt levels remain relatively stable, there is a marked increase in short-term debt obligations, especially in 2024. This occurs concurrently with a decrease in long-term debt, implying a possible refinancing strategy or upcoming repayment of long-term borrowings. The pronounced rise in short-term debt maturing within one year could indicate increased liquidity risk or a need for rollover financing in the short term. Monitoring the company’s ability to manage these short-term maturities will be critical going forward.
Total Debt (Fair Value)
| Dec 31, 2024 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Short-term and long-term debt, excluding finance leases | |
| Finance lease obligations | |
| Total short-term and long-term debt, including finance leases (fair value) | |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | |
Based on: 10-K (reporting date: 2024-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt:
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| Total | |||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × ÷ =
Interest Costs Incurred
Verizon Communications Inc., interest costs incurred
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest expense | |||||||||||
| Capitalized interest costs | |||||||||||
| Interest costs on debt balances and net amortization of debt discount |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Interest Expense
- The annual interest expense demonstrates a fluctuating but overall increasing trend over the observed period. It decreased from 4,247 million USD in 2020 to 3,485 million USD in 2021, followed by a slight increase to 3,613 million USD in 2022. Subsequently, there was a substantial rise in 2023, reaching 5,524 million USD, and it further increased to 6,649 million USD in 2024. This pattern indicates significant growth in interest costs in the latter years, suggesting higher borrowing costs or increased debt levels.
- Capitalized Interest Costs
- The capitalized interest costs show considerable volatility during the period. Starting at 555 million USD in 2020, there was a sharp increase to 1,841 million USD in 2021 and a further rise to 2,030 million USD in 2022. However, this was followed by a decline to 1,818 million USD in 2023, and a significant drop to 963 million USD in 2024. This trend implies an initial heavy capitalization of interest costs, potentially linked to increased capital expenditures or long-term projects, which then tapered off in the last two years.
- Interest Costs on Debt Balances and Net Amortization of Debt Discount
- This aggregated metric presents a steady upward trajectory throughout the entire period. Beginning at 4,802 million USD in 2020, it rose steadily each year, reaching 5,326 million USD in 2021, 5,643 million USD in 2022, 7,342 million USD in 2023, and 7,612 million USD in 2024. The consistent increase in this figure reflects a growing financial obligation related to debt, encompassing both interest expenses and amortization costs, affirming the rising cost structure associated with debt financing.
- Summary of Trends
- The data collectively indicates increasing financial costs linked to debt over the five-year span. Interest expense exhibits a notable escalation after 2021, while capitalized interest costs peak around 2022 before declining, suggesting shifting dynamics in capital investments or project financing approaches. The cumulative interest costs, including amortization, consistently increase, underscoring expanding debt obligations or rising interest rates. These trends highlight the importance of monitoring borrowing strategies and cost management to mitigate financial risk.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
2024 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= ÷ =
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs on debt balances and net amortization of debt discount
= ÷ =
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio exhibited a notable fluctuation over the five-year period. Beginning at 6.64 in 2020, the ratio increased significantly to 9.44 in 2021, indicating improved ability to cover interest expenses. In 2022, the ratio slightly decreased to 8.82 but remained relatively high compared to 2020. However, a sharp decline occurred in 2023, where the ratio dropped to 4.08, less than half of its peak in 2021. A slight recovery was observed in 2024, with the ratio rising modestly to 4.46, though it remained substantially below earlier levels.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio followed a similar overall pattern but displayed consistently lower values compared to the unadjusted ratio. It started at 5.88 in 2020 and increased to 6.18 in 2021. Subsequently, it declined to 5.65 in 2022. A more pronounced decrease was observed in 2023, falling to 3.07, marking the lowest point during the period. In 2024, the ratio improved to 3.89, signaling a partial recovery but still reflecting a weaker ability to cover interest when capitalized interest is considered.
- Overall Trends and Insights
- Both ratios reveal a strengthening position through 2021, followed by a period of weakening coverage capacity. The peak in 2021 suggests an optimal financial state for servicing interest obligations, whereas the significant declines in 2023 indicate increased financial pressure or higher interest costs relative to earnings. The slight improvements in 2024 imply some stabilization but underline a persistent challenge in maintaining prior coverage levels. The consistent disparity between the adjusted and unadjusted ratios highlights the impact of capitalized interest on the company's interest expense coverage, suggesting that capitalized interest is a meaningful factor in assessing financial health.