A Look Into Ampco-Pittsburgh's Debt


Over the past three months, shares of Ampco-Pittsburgh AP moved lower by 11.11%. Before having a look at the importance of debt, let us look at how much debt Ampco-Pittsburgh has.

Ampco-Pittsburgh's Debt

According to the Ampco-Pittsburgh's most recent financial statement as reported on August 9, 2021, total debt is at $40.88 million, with $26.61 million in long-term debt and $14.27 million in current debt. Adjusting for $13.31 million in cash-equivalents, the company has a net debt of $27.57 million.

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.

Investors look at the debt-ratio to understand how much financial leverage a company has. Ampco-Pittsburgh has $468.95 million in total assets, therefore making the debt-ratio 0.09. 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 40% 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. 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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