Fastenal’s (NASDAQ:FAST) stock has up 7.55 percent in the last three months. Let’s take a look at how much debt Fastenal has before we get into the importance of debt.
The Debt of Fastenal
Total debt is $405.00 million, according to Fastenal’s most recent financial statement, which was released on April 16, 2021, with $365.00 million in long-term debt and $40.00 million in current debt. The corporation has a net debt of $71.10 million after accounting for $333.90 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. Fastenal’s debt-to-asset ratio is 0.1, based on its total assets of $4.07 billion. 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.
The Importance of 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 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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