Omnicom Group (NYSE:OMC) stock has dropped 0.42 percent in the last three months. Let’s take a look at how much debt Omnicom Group has before we get into the importance of debt.
The Debt of Omnicom Group
According to Omnicom Group’s financial statement as of April 20, 2021, overall debt is $6.75 billion, with long-term debt at $6.74 billion and current debt at $5.90 million. The company’s net debt is $1.85 billion after accounting for $4.90 billion 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. The debt-to-asset ratio for Omnicom Group is 0.26, based on its total assets of $25.61 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 35 percent may be excessive in one business but appropriate in another.
The Importance of Debt
Debt, in addition to equity, is an important component of a company’s financial structure and helps to its growth. It becomes an appealing choice for executives seeking finance because it has a lower borrowing cost than stock.
However, a company’s cash flow may be harmed as a result of interest-payment requirements. When corporations use loan capital for commercial operations, equity owners can keep the excess profit earned by the debt capital.
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