What Does Tiffany's Debt Look Like?

Over the past three months, shares of Tiffany TIF decreased by 1.84%. Before having a look at the importance of debt, let us look at how much debt Tiffany has.

Tiffany's Debt

Based on Tiffany’s financial statement as of August 27, 2020, long-term debt is at $887.70 million and current debt is at $591.30 million, amounting to $1.48 billion in total debt. Adjusted for $1.04 billion in cash-equivalents, the company's net debt is at $435.30 million.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Tiffany has $6.86 billion in total assets, therefore making the debt-ratio 0.22. 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 40% might be higher for one industry and normal 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.

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.

Posted In: Debt InsightsNewsIntraday UpdateMarkets