Market Overview

A Look Into Amkor Technology's Debt

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Over the past three months, shares of Amkor Technology Inc. (NASDAQ: AMKR) rose by 64.44%. Before we understand the importance of debt, let's look at how much debt Amkor Technology has.

Amkor Technology's Debt

According to the Amkor Technology’s most recent financial statement as reported on April 30, 2020, total debt is at $1.51 billion, with $1.37 billion in long-term debt and $141.52 million in current debt. Adjusting for $941.45 million in cash-equivalents, the company has a net debt of $571.58 million.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Amkor Technology’s $4.81 billion in total assets, the debt-ratio is at 0.31. 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 25% might be higher for one industry, whereas average for another.

Why Debt Is Important

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, 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.

 

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