Market Overview

AmerisourceBergen's Debt Overview

Share:

Over the past three months, shares of AmerisourceBergen Inc. (NYSE: ABC) moved higher by 19.15%. Before we understand the importance of debt, let's look at how much debt AmerisourceBergen has.

AmerisourceBergen's Debt

Based on AmerisourceBergen’s balance sheet as of May 7, 2020, long-term debt is at $3.62 billion and current debt is at $522.81 million, amounting to $4.15 billion in total debt. Adjusted for $3.69 billion in cash-equivalents, the company's net debt is at $453.26 million.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering AmerisourceBergen’s $42.04 billion in total assets, the debt-ratio is at 0.1. 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

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.

 

Related Articles (ABC)

View Comments and Join the Discussion!

Posted-In: Debt InsightsNews Intraday Update Markets