Market Overview

Nielsen Holdings: Debt Overview

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Over the past three months, shares of Nielsen Holdings Inc. (NYSE: NLSN) rose by 5.24%. Before having a look at the importance of debt, let's look at how much debt Nielsen Holdings has.

Nielsen Holdings's Debt

Based on Nielsen Holdings’s balance sheet as of April 30, 2020, long-term debt is at $7.36 billion and current debt is at $1.05 billion, amounting to $8.41 billion in total debt. Adjusted for $359.00 million in cash-equivalents, the company's net debt is at $8.05 billion.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Nielsen Holdings’s $14.19 billion in total assets, the debt-ratio is at 0.59. 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. For example, a debt ratio of 40% might be higher for one industry, whereas normal 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.

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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