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Strategies & Market Trends : Fundamental Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (2023)	7/24/2012 2:22:24 PM
From: bruwin	1 Recommendation Read Replies (1) \| Respond to of 4720

Yahoo quoted the ‘Total Debt' in CL’s latest Quarterly (viz. “mrq”) as $4.97bil., as one can see in their Balance Sheet below. The only way I can see that they get close to that number is by adding Long Term Debt of $4.595bil. + $0.334bil. of the ‘Current portion of long term debt’ which sits within their Current Liabilities. That comes to $4.939bil. which is slightly less than $4.970bil. However, what is probably more relevant is what the authors of “WARREN BUFFETT and the INTERPRETATION of FINANCIAL STATEMENTS” state about his requirement for a company’s Long Term Debt relative to its Net Income. I’ve placed a scan, below, of Chapter 40 from that book. According to their ‘research’ Buffett requires that in any given year a company should have sufficient yearly Net Earnings to pay off all of its long term debt within a 3 or 4 year earnings period. It seems that he refers to only Long Term Debt and not Total Debt. In my table I’ve referred to the requirement of the ratio of Long Term Debt to Net Income as having to be less than 3. If this is the way it is, then CL’s long term debt for its latest Quarter was $4.595bil., and 4 times its TTM Net Income is 4 x $2.45bil. = $9.8bil. > $4.595bil.