Market Overview

Fidelity National's Debt Overview

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Shares of Fidelity National Info Inc. (NYSE: FIS) rose by 17.13% in the past three months. Before having a look at the importance of debt, let's look at how much debt Fidelity National Info has.

Fidelity National Info's Debt

Based on Fidelity National Info’s balance sheet as of May 7, 2020, long-term debt is at $18.98 billion and current debt is at $1.40 billion, amounting to $20.38 billion in total debt. Adjusted for $1.37 billion in cash-equivalents, the company's net debt is at $19.00 billion.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Fidelity National Info’s $82.47 billion in total assets, the debt-ratio is at 0.25. As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. A debt ratio of 35% might be higher for one industry, whereas average for another.

Importance of 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.

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