What does Toro’s debt look like?
During the past three months, the actions of Toro (NYSE: TTC) rose 8.89%. Before we understand the importance of debt, let’s take a look at Toro’s debt amount.
According to Toro’s most recent balance sheet released on June 3, 2021, total debt stands at $ 691.46 million, with $ 591.50 million in long-term debt and $ 99.96 million in current debt. . Adjusted for $ 497.63 million in cash equivalents, the company has net debt of $ 193.82 million.
Let’s define some of the terms we used in the paragraph above. Short-term debt is the part of a company’s debt that is owed for less than one year, while long-term debt is the part for more than one year. Cash equivalents include cash and any liquid security with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.
Shareholders look at the debt ratio to understand a company’s financial leverage. Toro has $ 3.00 billion in total assets, making the debt ratio of 0.23. 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 increases if interest rates rise. Different industries have different tolerance thresholds for debt ratios. A debt ratio of 40% may be higher for one industry and normal for another.
Significance of debt
Debt is an important factor in a company’s capital structure 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 keep excess profits generated by debt capital.
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