Over the past three months, shares of VF (NYSE:VFC) moved lower by 3.03%. Before we understand the importance of debt, let us look at how much debt VF has.

VF's Debt

Based on VF's balance sheet as of February 2, 2021, long-term debt is at $5.79 billion and current debt is at $300.75 million, amounting to $6.09 billion in total debt. Adjusted for $3.25 billion in cash-equivalents, the company's net debt is at $2.83 billion.

Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents include cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

Importance Of Debt

Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.

Interest-payment obligations can impact 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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