Market Overview

Qorvo's Debt Overview

Share:

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.

 

Related Articles (QRVO)

View Comments and Join the Discussion!

Posted-In: Debt InsightsNews Intraday Update Markets