Market Overview

Berry Global Group's Debt Overview

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Shares of Berry Global Group (NYSE: BERY) moved higher by 18.03% in the past three months. Before having a look at the importance of debt, let us look at how much debt Berry Global Group has.

Berry Global Group's Debt

Based on Berry Global Group’s balance sheet as of July 31, 2020, long-term debt is at $10.69 billion and current debt is at $70.00 million, amounting to $10.76 billion in total debt. Adjusted for $906.00 million in cash-equivalents, the company's net debt is at $9.85 billion.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Berry Global Group’s $16.73 billion in total assets, the debt-ratio is at 0.64. 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 35% might be higher for one industry and average for another.

Why Debt Is Important

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.

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.

 

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