During the past three months, the actions of Helen of Troy (NASDAQ: HELE) rose 2.17%. Before we understand the importance of debt, let’s take a look at the debt amount of Helen Of Troy.
The Debt of Helen of Troy
According to Helen Of Troy’s most recent balance sheet released on July 9, 2021, total debt stands at $ 510.97 million, with $ 509.09 million in long-term debt and $ 1.88 million. of current debt. Adjusted for $ 37.37 million in cash equivalents, the company has net debt of $ 473.61 million.
Let’s define some of the terms we used in the paragraph above. Short-term debt is the portion of a company’s debt that matures within one year, while long-term debt is the portion over one year. Cash equivalents include cash and all liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.
To understand a company’s degree of financial leverage, shareholders look at the debt ratio. Considering Helen Of Troy’s total assets of $ 2.35 billion, the debt ratio is 0.22. Generally speaking, a debt ratio greater than one means that a large part of the debt is financed by assets. As the debt ratio rises, the risk of default increases if interest rates rise. Different industries have different tolerance thresholds for debt ratios. A debt ratio of 40% may be higher for one industry and average for another.
Why do shareholders watch the debt?
Debt is an important factor in a company’s capital structure and can help it achieve growth. Debt generally has a relatively lower cost of financing than equity, making it an attractive option for executives.
However, due to interest payment obligations, a company’s cash flow can be affected. Having financial leverage also allows companies to use additional capital for their business operations, allowing stock owners to keep excess profits generated by debt capital.
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