Shares of Hecla Mining (NYSE:HL) is down 8.58% over the past three months. Before understanding the importance of debt, let’s take a look at how much debt Hecla Mining has.
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Hecla Mining debt
According to Hecla Mining’s most recent balance sheet, released on November 5, 2021, total debt stands at $527.11 million, including $516.25 million in long-term debt and $10.86 million in current debt. After adjusting for $190.90 million in cash equivalents, the company has a net debt of $336.21 million.
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.
Investors look at the debt-to-equity ratio to understand a company’s financial leverage. Hecla Mining has total assets of $2.67 billion, bringing the debt ratio to 0.2. 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 25% may be higher for one industry and average 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.
However, due to interest payment obligations, a company’s cash flow may be affected. Equity holders can retain excess profits, generated by debt capital, when companies use debt capital for their business operations.
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