Over the past three months, shares of Dun & Bradstreet Hldgs (NYSE:DNB) fell 2.19%. Before understanding the importance of debt, let’s take a look at how much debt Dun & Bradstreet Hldgs has.
Debt of Dun & Bradstreet Hldgs
Based on Dun & Bradstreet Hldgs balance sheet as of November 4, 2021, long-term debt is $3.54 billion and current debt is $28.10 million, for a total debt of $3.57 billions of dollars. Adjusted for $234.40 million in cash equivalents, the company’s net debt is $3.34 billion.
Let’s define some of the terms we used in the paragraph above. Current debt is the portion of a company’s debt that is due within one year, while long-term debt is the portion due in more than one year. Cash equivalents include cash and all liquid securities with maturities of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.
Shareholders look at the debt ratio to understand a company’s financial leverage. Dun & Bradstreet Hldgs has total assets of $9.75 billion, bringing the debt ratio to 0.37. Typically, a leverage ratio greater than one indicates that a significant portion of debt is asset-funded. A higher debt-to-equity ratio may also imply that the company could be at risk of default if interest rates were to rise. However, debt ratios vary widely from industry to industry. A debt ratio of 35% may be higher for one industry and normal for another.
Why Debt Matters
Debt is an important factor in a company’s capital structure and can help it achieve growth. Debt typically has a relatively lower cost of funding than equity, making it an attractive option for executives.
Interest payment obligations can impact the company’s cash flow. Having financial leverage also allows companies to use additional capital for business operations, allowing shareholders to retain excess profits generated by debt capital.
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