How Does AstraZeneca's Debt Look Like?
Over the past three months, shares of AstraZeneca Inc. (NYSE: AZN) moved higher by 8.10%. Before we understand the importance of debt, let's look at how much debt AstraZeneca has.
AstraZeneca's Debt
According to the AstraZeneca’s most recent balance sheet as reported on July 28, 2016, total debt is at $19.00 billion, with $16.95 billion in long-term debt and $2.06 billion in current debt. Adjusting for $3.92 billion in cash-equivalents, the company has a net debt of $15.09 billion.
Shareholders look at the debt-ratio to understand how much financial leverage a company has. AstraZeneca has $64.42 billion in total assets, therefore making the debt-ratio 0.3. As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. For example, a debt ratio of 25% might be higher for one industry, whereas normal for another.
Importance of Debt
Debt 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.
Interest-payment obligations can impact the cash-flow of the company. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.
See more from Benzinga
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
