Market Overview

What Does Fair Isaac's Debt Look Like?

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Shares of Fair Isaac (NYSE: FICO) moved higher by 4.96% in the past three months. Before having a look at the importance of debt, let us look at how much debt Fair Isaac has.

Fair Isaac's Debt

Based on Fair Isaac’s balance sheet as of July 29, 2020, long-term debt is at $739.04 million and current debt is at $188.00 million, amounting to $927.04 million in total debt. Adjusted for $125.67 million in cash-equivalents, the company's net debt is at $801.37 million.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Fair Isaac has $1.56 billion in total assets, therefore making the debt-ratio 0.59. 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 average for another.

Importance Of 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.

However, due to interest-payment obligations, cash-flow of a company can be impacted. 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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