What Does CoreCivic's Debt Look Like?

Shares of CoreCivic CXW moved lower by 15.22% in the past three months. Before we understand the importance of debt, let us look at how much debt CoreCivic has.

CoreCivic's Debt

According to the CoreCivic’s most recent financial statement as reported on August 6, 2020, total debt is at $2.26 billion, with $2.23 billion in long-term debt and $37.24 million in current debt. Adjusting for $363.77 million in cash-equivalents, the company has a net debt of $1.90 billion.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering CoreCivic’s $4.04 billion in total assets, the debt-ratio is at 0.56. 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 35% might be higher for one industry and average for another.

Why Shareholders 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. 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.