Crown Holdings’ (NYSE:CCK) stock has dropped 2.81 percent in the last three months. Let’s take a look at how much debt Crown Holdings has before we get into the importance of debt.
The Debt of Crown Holdings
Long-term debt is $7.88 billion, and current debt is $162.00 million, for a total debt of $8.04 billion, according to Crown Holdings’ financial statement as of April 23, 2021. The company’s net debt is $7.45 billion after adjusting for $588.00 million in cash equivalents.
Let’s define some of the terminology used in the preceding paragraph. The portion of a company’s debt due within a year is called current debt, while the portion due in more than a year is called long-term debt. Cash and liquid securities with maturities of 90 days or less are considered cash equivalents. Current debt plus long-term debt minus cash equivalents equals total debt.
The debt-ratio is used by shareholders to determine how much financial leverage a company has. Crown Holdings’ total assets are $16.18 billion, so the debt-to-asset ratio is 0.5. A debt-to-asset ratio greater than one shows that a significant percentage of debt is funded by assets. A larger debt-to-equity ratio could indicate that the corporation is putting itself at danger of default if interest rates rise. Debt-to-income ratios, on the other hand, vary greatly amongst industries. A debt-to-equity ratio of 25% may be excessive in one business but normal in another.
Debt’s Importance In addition to equity, debt is an important component of a company’s capital structure and contributes to its growth. It becomes an appealing choice for executives seeking finance because it has a lower borrowing cost than stock.
Interest payments can have a negative impact on a company’s cash flow. Financial leverage also allows businesses to use more money for operations, allowing equity owners to keep the excess profit earned by loan financing.
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