Market Overview

What Does Nordson's Debt Look Like?

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Shares of Nordson Inc. (NASDAQ: NDSN) moved higher by 15.92% in the past three months. Before having a look at the importance of debt, let's look at how much debt Nordson has.

Nordson's Debt

Based on Nordson’s balance sheet as of June 5, 2020, long-term debt is at $1.25 billion and current debt is at $49.77 million, amounting to $1.30 billion in total debt. Adjusted for $306.25 million in cash-equivalents, the company's net debt is at $991.84 million.

Investors look at the debt-ratio to understand how much financial leverage a company has. Nordson has $3.74 billion in total assets, therefore making the debt-ratio 0.35. 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.

Importance of Debt

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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