Rexnord’s (NYSE:RXN) stock has up 4.58 percent in the last three months. Let’s take a look at how much debt Rexnord has before we get into the importance of debt.
The Debt of Rexnord
Long-term debt is $1.19 billion, while current debt is $2.50 million, according to Rexnord’s financial statement as of April 27, 2021. Total debt is $1.19 billion. The company’s net debt is $884.50 million after accounting for $307.30 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. The debt-to-asset ratio for Rexnord is 0.34, based on its total assets of $3.49 billion. A debt-to-asset ratio greater than one indicates that assets are used to fund a significant percentage of debt. If interest rates rise, the danger of defaulting on loans rises as the debt-to-income ratio rises. Varying industries have different debt-ratio tolerance criteria. A debt-to-equity ratio of 25% may be higher in one industry and average in another.
Why Do Investors Care About 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.
Interest payments 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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