Market Overview

A Look Into Cubic's Debt


Over the past three months, shares of Cubic (NYSE: CUB) decreased by 1.34%. Before we understand the importance of debt, let us look at how much debt Cubic has.

Cubic's Debt

According to the Cubic’s most recent financial statement as reported on August 5, 2020, total debt is at $877.40 million, with $589.15 million in long-term debt and $288.25 million in current debt. Adjusting for $109.79 million in cash-equivalents, the company has a net debt of $767.60 million.

Investors look at the debt-ratio to understand how much financial leverage a company has. Cubic has $2.26 billion in total assets, therefore making the debt-ratio 0.39. 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 25% might be higher for one industry and average 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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