Market Overview

Fastenal's Debt Overview


Shares of Fastenal Inc. (NASDAQ: FAST) increased by 22.21% in the past three months. Before we understand the importance of debt, let's look at how much debt Fastenal has.

Fastenal's Debt

According to the Fastenal’s most recent balance sheet as reported on April 17, 2020, total debt is at $455.00 million, with $450.10 million in long-term debt and $4.90 million in current debt. Adjusting for $160.70 million in cash-equivalents, the company has a net debt of $294.30 million.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Fastenal’s $3.93 billion in total assets, the debt-ratio is at 0.12. 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. For example, a debt ratio of 35% might be higher for one industry, whereas normal for another.

Why Investors 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. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.


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