Market Overview

What Does Nu Skin's Debt Look Like?

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Over the past three months, shares of Nu Skin Enterprises (NYSE: NUS) increased by 24.10%. Before we understand the importance of debt, let us look at how much debt Nu Skin Enterprises has.

Nu Skin Enterprises's Debt

Based on Nu Skin Enterprises’s financial statement as of August 6, 2020, long-term debt is at $319.93 million and current debt is at $95.00 million, amounting to $414.93 million in total debt. Adjusted for $375.51 million in cash-equivalents, the company's net debt is at $39.42 million.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Nu Skin Enterprises has $1.79 billion in total assets, therefore making the debt-ratio 0.23. 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, 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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