Steel Dynamics (NASDAQ:STLD) has lost a tenth of a percent in the last three months. Let’s take a look at how much debt Steel Dynamics has before we get into the importance of debt.
The Debt of Steel Dynamics
Total debt is $3.13 billion, according to Steel Dynamics’ most recent financial sheet, which was released on April 29, 2021, with $3.02 billion in long-term debt and $115.08 million in current debt. The corporation has a net debt of $1.89 billion after accounting for $1.25 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 shareholders to determine how much financial leverage a company has. Steel Dynamics’ debt-to-assets ratio is 0.31, based on its total assets of $10.13 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.
Why Are Shareholders Concerned 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. 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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