Market Overview

A Look Into RiceBran Tech's Debt

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Over the past three months, shares of RiceBran Tech Inc. (NASDAQ: RIBT) decreased by 45.30%. Before having a look at the importance of debt, let's look at how much debt RiceBran Tech has.

RiceBran Tech's Debt

According to the RiceBran Tech’s most recent balance sheet as reported on August 12, 2020, total debt is at $4.48 million, with $2.00 million in long-term debt and $2.48 million in current debt. Adjusting for $3.35 million in cash-equivalents, the company has a net debt of $1.14 million.

Investors look at the debt-ratio to understand how much financial leverage a company has. RiceBran Tech has $35.34 million in total assets, therefore making the debt-ratio 0.13. 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. For example, a debt ratio of 25% might be higher for one industry, whereas normal for another.

Why Investors Look At 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, 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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