What Does Brunswick's Debt Look Like?

Shares of Brunswick (NYSE: BC) increased by 4.81% in the past three months. Before having a look at the importance of debt, let us look at how much debt Brunswick has.

Brunswick's Debt

Based on Brunswick’s financial statement as of August 4, 2020, long-term debt is at $1.06 billion and current debt is at $225.30 million, amounting to $1.29 billion in total debt. Adjusted for $541.50 million in cash-equivalents, the company's net debt is at $744.20 million.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Brunswick’s $3.74 billion in total assets, the debt-ratio is at 0.34. Generally speaking, a debt-ratio more than one 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. A debt ratio of 40% might be higher for one industry and average for another.

Why Investors Look At 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. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.