Market Overview

Qorvo's Debt Overview


Over the past three months, shares of Qorvo (NASDAQ: QRVO) moved higher by 10.63%. Before we understand the importance of debt, let us look at how much debt Qorvo has.

Qorvo's Debt

Based on Qorvo’s financial statement as of July 30, 2020, long-term debt is at $1.87 billion and current debt is at $6.59 million, amounting to $1.88 billion in total debt. Adjusted for $1.14 billion in cash-equivalents, the company's net debt is at $739.79 million.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Qorvo’s $6.88 billion in total assets, the debt-ratio is at 0.27. As a rule of thumb, a debt-ratio more than one 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. A debt ratio of 40% might be higher for one industry and 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.

However, interest-payment obligations can have an adverse impact on 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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