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Shares of Thor Industries (NYSE:THO) decreased by 20.49% in the past three months. Before having a look at the importance of debt, let us look at how much debt Thor Industries has.
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Thor Industries's Debt
According to the Thor Industries's most recent financial statement as reported on June 8, 2021, total debt is at $1.89 billion, with $1.72 billion in long-term debt and $169.88 million in current debt. Adjusting for $294.56 million in cash-equivalents, the company has a net debt of $1.59 billion.
Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents include cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.
To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Thor Industries's $6.71 billion in total assets, the debt-ratio is at 0.28. Generally speaking, a debt-ratio more than one means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 25% might be higher for one industry and average for another.
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Why Shareholders Look At 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.
Interest-payment obligations can impact 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.
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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.