Walgreens Boots Alliance’s Debt Insights
During the last three months, the shares of Alliance of Walgreens boots (NASDAQ: WBA) rose 33.82%. Before we look at the importance of debt, let’s take a look at the amount of debt from Walgreens Boots Alliance.
Walgreens Boots Alliance Debt
Based on Walgreens Boots Alliance’s financial statements as at March 31, 2021, long-term debt is $ 11.00 billion and current debt is $ 5.16 billion, or $ 16.16 billion of total debt. Adjusted by $ 1.03 billion in cash equivalents, the company’s net debt stood at $ 15.13 billion.
Let’s define some of the terms we used in the paragraph above. Current debt is the portion of a business’ debt that is due within one year, while long-term debt is the portion due over one year. Cash equivalents include cash and all liquid securities with a maturity of 90 days or less. Total debt is current debt plus long-term debt minus cash equivalents.
To understand a company’s degree of financial leverage, investors look at the debt-to-equity ratio. Considering the Walgreens Boots Alliance total assets of $ 90.92 billion, the debt ratio is 0.18. Generally speaking, a debt ratio greater than one means that a large part of the debt is financed by assets. As the debt ratio rises, the risk of default on loans also increases if interest rates rise. Different industries have different tolerances for debt ratios. A debt ratio of 40% may be higher for one sector and normal for another.
Why are investors turning to debt?
Debt is an important factor in the capital structure of a business and can help it achieve growth. Debt generally has a relatively lower cost of financing than equity, making it an attractive option for executives.
However, due to interest payment obligations, a company’s cash flow can be affected. Having financial leverage also allows companies to use additional capital for their business operations, allowing shareholders to retain excess profits generated by debt capital.
Are you looking for stocks with a low debt ratio? Check out Benzinga Pro, a market research platform that gives investors near instant access to dozens of stock market metrics, including the debt ratio. Click here to find out more.