Market Overview

Debt Overview Of Tyson Foods


Over the past three months, shares of Tyson Foods Inc. (NYSE: TSN) increased by 10.55%. Before we understand the importance of debt, let's look at how much debt Tyson Foods has.

Tyson Foods's Debt

Based on Tyson Foods’s balance sheet as of August 3, 2020, long-term debt is at $11.28 billion and current debt is at $750.00 million, amounting to $12.03 billion in total debt. Adjusted for $1.36 billion in cash-equivalents, the company's net debt is at $10.66 billion.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Tyson Foods’s $34.56 billion in total assets, the debt-ratio is at 0.35. 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.

Why Debt Is Important

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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