Market Overview

What Does Sunrun's Debt Look Like?

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Over the past three months, shares of Sunrun (NASDAQ: RUN) increased by 227.79%. Before having a look at the importance of debt, let us look at how much debt Sunrun has.

Sunrun's Debt

Based on Sunrun’s financial statement as of August 10, 2020, long-term debt is at $2.65 billion and current debt is at $142.49 million, amounting to $2.80 billion in total debt. Adjusted for $269.57 million in cash-equivalents, the company's net debt is at $2.53 billion.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Sunrun’s $6.01 billion in total assets, the debt-ratio is at 0.47. 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. 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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