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How Does DISH Network's Debt Look?

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Over the past three months, shares of DISH Network Inc. (NASDAQ: DISH) rose by 40.50%. Before having a look at the importance of debt, let's look at how much debt DISH Network has.

DISH Network's Debt

Based on DISH Network’s financial statement as of August 7, 2020, long-term debt is at $10.99 billion and current debt is at $2.30 billion, amounting to $13.29 billion in total debt. Adjusted for $2.59 billion in cash-equivalents, the company's net debt is at $10.70 billion.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering DISH Network’s $33.50 billion in total assets, the debt-ratio is at 0.4. 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

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, due to interest-payment obligations, cash-flow of a company can be impacted. 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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