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Shares of Sirius XM Holdings (NASDAQ:SIRI) increased by 1.43% in the past three months. Before we understand the importance of debt, let us look at how much debt Sirius XM Holdings has.
Sirius XM Holdings's Debt
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According to the Sirius XM Holdings’s most recent financial statement as reported on July 30, 2020, total debt is at $9.49 billion, with $7.84 billion in long-term debt and $1.65 billion in current debt. Adjusting for $1.77 billion in cash-equivalents, the company has a net debt of $7.72 billion.
To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Sirius XM Holdings’s $12.46 billion in total assets, the debt-ratio is at 0.76. As a rule of thumb, a debt-ratio more than one 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 and average for another.
Importance Of Debt
Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.
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.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.