Over the past three months, shares of American Airlines Group Inc. (NASDAQ: AAL) decreased by 3.35%. Before we understand how much debt American Airlines Group has, let’s look at the importance of debt.
Why Debt Is Important
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, interest-payment obligations can have an adverse impact on the cash-flow of the company. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.
American Airlines Group's Debt
Based on American Airlines Group’s financial statement as of April 30, 2020, long-term debt is at $21.56 billion and current debt is at $3.52 billion, amounting to $25.08 billion in total debt. Adjusted for $474.00 million in cash-equivalents, the company's net debt is at $24.61 billion.
To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering American Airlines Group’s $58.58 billion in total assets, the debt-ratio is at 0.43. 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. A debt ratio of 40% might be higher for one industry, whereas average for another.
See more from Benzinga
- A Look Into American Airlines Group's Price Over Earnings
- Benzinga's Top Upgrades, Downgrades For June 17, 2020
- A Peek Into American Airlines Group's Price Over Earnings
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.