Market Overview

A Look Into Walgreens's Debt


Over the past three months, shares of Walgreens Boots Alliance Inc. (NASDAQ: WBA) moved lower by 16.65%. Before having a look at the importance of debt, let's look at how much debt Walgreens Boots Alliance has.

Walgreens Boots Alliance's Debt

According to the Walgreens Boots Alliance’s most recent balance sheet as reported on April 2, 2020, total debt is at $16.61 billion, with $10.62 billion in long-term debt and $5.98 billion in current debt. Adjusting for $792.00 million in cash-equivalents, the company has a net debt of $15.82 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. Walgreens Boots Alliance has $90.00 billion in total assets, therefore making the debt-ratio 0.18. Generally speaking, a debt-ratio more than 1 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 40% might be higher for one industry, whereas average for another.

Importance of Debt

Debt is an important factor in the capital structure of a company, and can help it attain growth. Debt usually has a relatively lower financing cost than equity, which makes it an attractive option for executives.

However, interest-payment obligations can have an adverse impact on 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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