Debt-Equity Ratio Computation
P.V. Viswanath

This is an exercise on how the debt-equity ratio can be computed, and how there is frequently no consistency between the number provided on different websites.  The data and the computations below were obtained on Feb. 14, 2000.

  1. Computation of the debt-equity ratio
  2. Events in the life of AT&T as of early February 2000
  3. Balance Sheet Information obtained from Disclosure (compiled from 10-K filings): 12/31/94 to 12/31/98
  4. Balance Sheet Information obtained from Disclosure (compiled from 10-K filings): 12/31/89 to 12/31/93
  5. 10-Q filings filed on Nov. 3, 1999 (obtained from AT&T Website)

Computation of the debt-equity ratio

According to http://biz.yahoo.com/p/t/t.html, the debt-equity ratio for the most recent quarter is 0.41.  According to the Profiles Help, this is defined as "Total Debt for the most recent fiscal quarter divided by Total Shareholder Equity for the same period."  However, if we compute the debt-equity ratio (using information from the 10-Q filings posted on the AT&T website) as of Sept. 30, 1999, using D/E ratio = Long Term Debt/Shareholder Equity, we get (in billions) 22.073/74.763 = 0.295.  

If we compute D/E ratio = Current plus long-term portion of long-term debt/shareholder equity, we get (in billions) (8.856 + 22.073)/74.763 = 0.414, which is close to the number provided in Yahoo. 

The debt-equity ratio provided by msn.com ( http://moneycentral.msn.com/investor/invsub/results/hilite.asp?Symbol=t) is 0.30, which is substantially different from 0.41.  However, the site declares: "Computed ratios are based on latest 12 months' results."  Can we replicate this?  Are the numbers for the end of 1998?  For what date are they valid?  Here are the ratios computed at various dates using the two different definitions, using data from the 10-Q filings posted at the AT&T website.. 

Sept. 30, 1999 June 30, 1999 Mar 30, 1999 Dec. 30, 1998 Sept. 30, 1998
Debt defined excl. current portion 0.295 0.301 0.320 0.218 0.253
Debt defined incl. current portion 0.414 0.398 0.389 0.264 0.295

Clearly, the definition and/or the date used by MSN is unclear, which makes it much more difficult to use.  

According to Quicken (http://www.quicken.com/investments/stats/?symbol=T), the ratio is 0.26.  According to Quicken, this ratio is defined as follows: The ratio of a company's liabilities to its equity (total value of stock). Long-term debt-equity is the ratio of a company's long-term liabilities (debt that won't be paid off in one year) to its equity. Total debt-equity is the ratio of a company's long-term and current liabilities (debt that will be paid off within one year) to its equity.

Using data from the 10-K filings obtained from Disclosure, the numbers are:

As of date 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
Debt-Equity Ratio (incl current portion) 0.2636 0.5044 0.5091 1.1994 1.3964 1.5577 0.8564 0.9574 0.9094 0.8298
Debt-Equity Ratio (excl current portion) 0.2177 0.3318 0.3884 0.4945 0.6338 0.8040 0.4547 0.5228 0.5889 0.6393

Plotted over time, this gives us an idea of how AT&T has changed its capital structure over time.

Events in the life of AT&T as of early February 2000.

 

Balance Sheet Information obtained from Disclosure (compiled from 10-K filings): 12/31/94 to 12/31/98

        ANNUAL ASSETS (000s)          
FISCAL YEAR ENDING 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
CASH 3,160,000 318,000 NA 129,000 1,208,000
MRKTABLE SECURITIES NA 307,000 NA NA NA
RECEIVABLES 8,652,000 8,675,000 8,969,000 19,024,000 28,623,000
INVENTORIES NA NA NA NA 3,633,000
OTHER CURRENT ASSETS 2,306,000 7,477,000 8,104,000 2,935,000 4,147,000
TOTAL CURRENT ASSETS 14,118,000 16,777,000 17,073,000 22,088,000 37,611,000
PROP, PLANT & EQUIP 26,903,000 24,203,000 19,736,000 16,083,000 22,035,000
NET PROP & EQUIP 26,903,000 24,203,000 19,736,000 16,083,000 22,035,000
INVEST & ADV TO SUBS 4,434,000 3,866,000 3,875,000 3,646,000 2,708,000
OTHER NON-CUR ASSETS 670,000 2,895,000 2,382,000 8,194,000 4,513,000
DEFERRED CHARGES 2,074,000 2,156,000 10,004,000 1,793,000 8,402,000
INTANGIBLES 7,948,000 8,368,000 NA 8,056,000 NA
DEPOSITS & OTH ASSET 3,403,000 2,830,000 2,312,000 2,535,000 3,993,000
TOTAL ASSETS 59,550,000 61,095,000 55,382,000 62,395,000 79,262,000
           
        ANNUAL LIABILITIES (000S)          
FISCAL YEAR ENDING 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
ACCOUNTS PAYABLE 6,226,000 6,402,000 6,157,000 5,089,000 6,011,000
CUR LONG TERM DEBT 1,171,000 4,085,000 2,449,000 12,176,000 13,666,000
ACCRUED EXPENSES 1,986,000 2,390,000 2,614,000 2,908,000 4,105,000
OTHER CURRENT LIAB 6,059,000 4,440,000 4,931,000 4,407,000 7,148,000
TOTAL CURRENT LIAB 15,442,000 17,317,000 16,151,000 24,580,000 30,930,000
DEFERRED CHARGES/INC 5,453,000 8,853,000 4,827,000 5,446,000 4,921,000
LONG TERM DEBT 5,556,000 7,857,000 7,883,000 8,542,000 11,358,000
OTHER LONG TERM LIAB 7,577,000 3,390,000 6,226,000 6,553,000 13,039,000
TOTAL LIABILITIES 34,028,000 37,417,000 35,087,000 45,121,000 60,248,000
MINORITY INT (LIAB) NA NA NA NA 1,093,000
COMMON STOCK NET 1,754,000 1,789,000 1,623,000 1,596,000 1,569,000
CAPITAL SURPLUS 15,195,000 17,121,000 15,697,000 16,614,000 15,825,000
RETAINED EARNINGS 8,676,000 4,876,000 3,078,000 -687,000 687,000
OTHER EQUITIES -103,000 -108,000 -103,000 -249,000 -160,000
SHAREHOLDER EQUITY 25,522,000 23,678,000 20,295,000 17,274,000 17,921,000
TOT LIAB & NET WORTH 59,550,000 61,095,000 55,382,000 62,395,000 79,262,000

 

Balance Sheet Information obtained from Disclosure (compiled from 10-K filings): 12/31/89 to 12/31/93

        ANNUAL ASSETS (000s)        
FISCAL YEAR ENDING 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
CASH 671,000 1,310,000 2,148,000 1,875,000 1,183,000
RECEIVABLES 23,664,000 19,609,000 16,526,000 13,413,000 9,555,000
INVENTORIES 3,222,000 2,659,000 3,125,000 3,125,000 3,206,000
OTHER CURRENT ASSETS 2,811,000 2,936,000 2,814,000 1,933,000 1,347,000
TOTAL CURRENT ASSETS 30,368,000 26,514,000 24,613,000 20,346,000 15,291,000
PROP, PLANT & EQUIP 21,015,000 19,358,000 18,689,000 18,661,000 15,919,000
NET PROP & EQUIP 21,015,000 19,358,000 18,689,000 18,661,000 15,919,000
INVEST & ADV TO SUBS 3,060,000 864,000 976,000 1,471,000 1,187,000
OTHER NON-CUR ASSETS 3,815,000 3,643,000 3,180,000 2,658,000 1,709,000
DEFERRED CHARGES 7,570,000 3,480,000 3,084,000 NA NA
DEPOSITS & OTH ASSET 3,565,000 3,329,000 2,813,000 5,186,000 3,581,000
TOTAL ASSETS 69,393,000 57,188,000 53,355,000 48,322,000 37,687,000
         
        ANNUAL LIABILITIES (000S)        
FISCAL YEAR ENDING 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
ACCOUNTS PAYABLE 4,853,000 5,045,000 4,989,000 4,846,000 4,763,000
CUR LONG TERM DEBT 11,063,000 7,600,000 7,053,000 5,090,000 2,426,000
ACCRUED EXPENSES 3,802,000 3,336,000 3,259,000 2,896,000 2,571,000
OTHER CURRENT LIAB 6,336,000 5,405,000 5,690,000 4,200,000 2,477,000
TOTAL CURRENT LIAB 26,054,000 21,386,000 20,991,000 17,032,000 12,237,000
DEFERRED CHARGES/INC 2,764,000 5,191,000 4,333,000 4,139,000 3,178,000
LONG TERM DEBT 11,802,000 8,604,000 8,484,000 9,354,000 8,144,000
OTHER LONG TERM LIAB 13,446,000 2,634,000 2,902,000 1,599,000 1,390,000
TOTAL LIABILITIES 54,066,000 37,815,000 36,710,000 32,124,000 24,949,000
MINORITY INT (LIAB) 648,000 452,000 417,000 315,000 NA
PREFERRED STOCK 1,305,000 NA NA NA NA
COMMON STOCK NET 1,547,000 1,340,000 1,309,000 1,275,000 1,076,000
CAPITAL SURPLUS 14,324,000 11,425,000 10,624,000 9,497,000 8,700,000
RETAINED EARNINGS -2,110,000 6,498,000 4,599,000 5,580,000 2,962,000
OTHER EQUITIES -387,000 -342,000 -304,000 -469,000 NA
SHAREHOLDER EQUITY 14,679,000 18,921,000 16,228,000 15,883,000 12,738,000
TOT LIAB & NET WORTH 69,393,000 57,188,000 53,355,000 48,322,000 37,687,000

 

10-Q filings filed on Nov. 3, 1999 (obtained from AT&T Website)

                           CONSOLIDATED BALANCE SHEETS
                   (Dollars in Millions Except Share Amounts)
                                   (Unaudited)

                                                    September 30,   December 31,
                                                           1999           1998
ASSETS

Cash and cash equivalents ...........................  $      -        $ 3,160

Receivables, less allowances of $1,488 and $1,060....    10,629          9,055

Deferred income taxes................................     1,638          1,310

Other current assets.................................       773            593

TOTAL CURRENT ASSETS.................................    13,040         14,118

Property, plant and equipment, net of accumulated
  depreciation of $28,886 and $25,374................    36,475         26,903

Franchise costs, net of accumulated amortization
  of $509............................................    32,122              -

Licensing costs, net of accumulated amortization
  of $1,430 and $1,266...............................     8,353          7,948

Goodwill, net of accumulated amortization of
  $304 and $226......................................     7,214          2,205

Investment in Liberty Media Group and related
  receivables, net...................................    35,519              -

Other investments....................................    20,211          4,434

Prepaid pension costs................................     2,364          2,074

Other assets.........................................     6,508          1,868

TOTAL ASSETS.........................................  $161,806        $59,550

                                    (CONT'D)

                                                         AT&T Form 10-Q - Part I

                       CONSOLIDATED BALANCE SHEETS (CONT'D)
                   (Dollars in Millions Except Share Amounts)
                                   (Unaudited)

                                                    September 30,   December 31,
                                                           1999         1998
LIABILITIES

Accounts payable.....................................  $  5,915      $ 6,226
Payroll and benefit-related liabilities..............     2,278        1,986
Debt maturing within one year........................     8,856        1,171
Dividends payable....................................       703          581
Other current liabilities............................     5,763        5,478

TOTAL CURRENT LIABILITIES............................    23,515       15,442

Long-term debt.......................................    22,073        5,556
Long-term benefit-related liabilities................     4,248        4,255
Deferred income taxes................................    24,708        5,453
Other long-term liabilities and deferred credits.....     3,752        3,213

TOTAL LIABILITIES ...................................    78,296       33,919

Minority Interest in Equity of Consolidated
  Subsidiaries.......................................     2,401          109

Company-Obligated Convertible Quarterly Income
  Preferred Securities of Subsidiary Trust Holding
  Solely Subordinated Debt Securities of AT&T........     4,697            -

Subsidiary-Obligated Mandatorily Redeemable Preferred
  Securities of Subsidiary Trusts Holding Solely
  Subordinated Debt Securities of an AT&T
  Subsidiary.........................................     1,649            -

SHAREOWNERS' EQUITY
Common Stock:
AT&T Common Stock, $1 par value,  authorized
  6,000,000,000  shares;  issued and outstanding
  3,195,633,438  shares  (net of  287,528,136  treasury
  shares) at September  30,  1999 and  2,630,391,784
  shares (net of  80,222,341 treasury shares) at
  December 31, 1998..................................     3,196        2,630
Liberty Media Group Class A Tracking Stock, $1 par
  value, authorized 2,500,000,000 shares; issued
  and outstanding 1,156,751,950 shares at
  September 30, 1999.................................     1,157            -
Liberty Media Group Class B Tracking Stock, $1 par
  value, authorized 250,000,000 shares; issued
  and outstanding 108,421,708 shares at
  September 30, 1999.................................       108            -
Additional Paid-in Capital:
  AT&T Common Stock..................................    27,506       15,195
  Liberty Media Group Stock..........................    32,663            -
Guaranteed ESOP obligation...........................       (17)         (44)
Retained Earnings (Accumulated Deficit):
  AT&T Common Stock..................................     8,409        7,800
  Liberty Media Group Stock..........................      (818)           -
Accumulated other comprehensive income...............     2,559          (59)
TOTAL SHAREOWNERS' EQUITY............................    74,763       25,522

TOTAL LIABILITIES & SHAREOWNERS' EQUITY..............  $161,806      $59,550

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