Market Overview

A Look Into Ryder System's Debt

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Over the past three months, shares of Ryder System (NYSE: R) rose by 5.43%. Before having a look at the importance of debt, let us look at how much debt Ryder System has.

Ryder System's Debt

According to the Ryder System’s most recent balance sheet as reported on July 31, 2020, total debt is at $8.15 billion, with $6.69 billion in long-term debt and $1.46 billion in current debt. Adjusting for $831.47 million in cash-equivalents, the company has a net debt of $7.32 billion.

Investors look at the debt-ratio to understand how much financial leverage a company has. Ryder System has $14.21 billion in total assets, therefore making the debt-ratio 0.57. 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 normal 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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