Market Overview

What Does Hexcel's Debt Look Like?

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Shares of Hexcel (NYSE: HXL) decreased by 15.50% in the past three months. Before having a look at the importance of debt, let us look at how much debt Hexcel has.

Hexcel's Debt

Based on Hexcel’s balance sheet as of July 27, 2020, long-term debt is at $1.26 billion and current debt is at $500.00 thousand, amounting to $1.27 billion in total debt. Adjusted for $257.20 million in cash-equivalents, the company's net debt is at $1.01 billion.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Hexcel has $3.22 billion in total assets, therefore making the debt-ratio 0.39. 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 25% might be higher for one industry and normal for another.

Why Shareholders 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, interest-payment obligations can have an adverse impact on 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.

 

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