Amgen’s (NASDAQ:AMGN) stock has dropped by a tenth of a percent in the last three months. Let’s take a look at how much debt Amgen has before we get into the importance of debt.
The Debt of Amgen
Total debt is $32.69 billion, according to Amgen’s most recent balance statement, which was released on April 28, 2021, with $31.13 billion in long-term debt and $1.56 billion in current debt. The corporation has a net debt of $26.57 billion after accounting for $6.11 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. The debt-to-asset ratio for Amgen is 0.52, based on its total assets of $62.54 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 higher in one industry and average in another.
Debt’s Importance
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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