Daqo New Energy (NYSE:DQ) has lost 12.69 percent of its value in the last three months. Let’s take a look at how much debt Daqo New Energy has before we get into the importance of debt.
The Debt of Daqo New Energy
Total debt is $231.52 million, according to Daqo New Energy’s most recent financial statement, which was released on April 22, 2021, with $123.22 million in long-term debt and $108.30 million in current debt. The company has a net debt of $154.92 million after accounting for $76.60 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 investors to determine how much financial leverage a company has. Daqo New Energy’s total assets are $1.24 billion, resulting in a debt-to-asset ratio of 0.19. 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 higher in one industry and average in another.
Why Do Investors Care About Debt?
Debt is a vital part of a company’s capital structure, and it may help it grow. Debt typically has a lower financing cost than stock, making it a more appealing alternative for CEOs.
Interest payments, on the other hand, can have a negative impact on a company’s cash flow. When corporations use loan capital for commercial operations, equity owners can keep the excess profit earned by the debt capital.
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