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Global Payments's Debt Overview

Benzinga Insights
·2 min read

Shares of Global Payments (NYSE: GPN) moved higher by 7.76% in the past three months. Before we understand the importance of debt, let us look at how much debt Global Payments has.

Global Payments's Debt

According to the Global Payments’s most recent financial statement as reported on August 3, 2020, total debt is at $9.71 billion, with $8.44 billion in long-term debt and $1.27 billion in current debt. Adjusting for $1.83 billion in cash-equivalents, the company has a net debt of $7.89 billion.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Global Payments has $44.00 billion in total assets, therefore making the debt-ratio 0.22. Generally speaking, a debt-ratio more than one means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 40% might be higher for one industry and average for another.

Why Shareholders Look At 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.

However, due to interest-payment obligations, cash-flow of a company can be impacted. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

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