Leverage for Bristol-Myers Squibb
Bristol-Myers Squibb Company (BMY), an American multinational pharmaceutical giant, uses both equity and debt for its working capital requirements and investments in business.
Net debt to EBITDA
Net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) is a measure of leverage calculated as a company’s interest-bearing liabilities minus cash or cash equivalents, divided by its EBITDA. If a company has more cash than debt, the ratio can be negative.
The above chart shows a comparison of net debt to EBITDA for Bristol Myers Squibb (BMY) and its peers, including AstraZeneca (AZN), Merck & Co. (MRK), GlaxoSmithKline (GSK), and Eli Lily (LLY). Bristol-Myers Squibb’s cash and marketable securities are higher than its total debt, which leads to a negative net debt to EBITDA.
Total debt to equity
Total debt to equity is a measure of financial leverage that’s calculated by dividing total debt liabilities by shareholders’ equity. Total debt-to-equity ratio for Bristol Myers Squibb is 52.2%. For peers AstraZeneca, Eli Lily, GlaxoSmithKline, and Merck & Co., it’s 55%, 52.3%, 380%, and 43.8%. This shows that BMY uses moderate debt to equity, thereby enabling the company to raise more debt if needed.
As of December 31, 2014, Moody’s Investors Service’s long-term and short term credit ratings are A2 and Prime-1, respectively, with a negative outlook for long-term credit. Standard & Poor’s long-term and short-term credit ratings are A+ and A-1+, respectively, with a stable long-term credit outlook. Fitch’s long-term and short-term credit ratings are A- and F2, respectively, with a stable long-term credit outlook.
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