SunPower Debt Snapshot – Benzinga
Actions of SunPower SPWR fell 28.98% in the past three months. Before we understand the importance of debt, let’s take a look at SunPower’s debt amount.
Based on SunPower’s balance sheet as of November 4, 2021, long-term debt stands at $ 465.45 million and current debt at $ 66.30 million, for a total of $ 531.76 million. Adjusted for $ 268.57 million in cash equivalents, the company’s net debt stands at $ 263.18 million.
Let’s define some of the terms we used in the paragraph above. Short-term debt is the portion of a company’s debt that is owed for less than one year, while long-term debt is the portion for more than one year. Cash equivalents include cash and all liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.
To understand a company’s degree of financial leverage, shareholders look at the debt ratio. Considering SunPower’s total assets of $ 1.43 billion, the debt ratio is 0.37. Typically, a debt ratio greater than one indicates that a considerable amount of debt is financed by assets. A higher debt ratio can also imply that the company could default if interest rates were to rise. However, debt ratios vary considerably from sector to sector. A debt ratio of 40% may be higher for one industry and average for another.
Why do shareholders watch the debt?
Besides equity, debt is an important factor in a company’s capital structure and contributes to its growth. Due to its lower cost of funding relative to equity, it becomes an attractive option for executives trying to raise capital.
However, interest payment obligations can have a negative impact on a company’s cash flow. Stock owners can keep excess profits, generated by debt capital, when companies use debt capital for their business operations.
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