Leidos Holdings: Debt Snapshot | Benzinga


During the last three months, the shares of Leidos Holdings (NYSE: LDOS) was down 4.11%. Before understanding the importance of debt, let’s take a look at the amount of debt of Leidos Holdings.

Debt of Leidos Holdings

According to Leidos Holdings’ latest financial statement released on February 23, 2021, total debt is $ 4.74 billion, with $ 4.64 billion in long-term debt and $ 100.00 million in current debt. Adjusting for $ 524.00 million in cash equivalents, the company has net debt of $ 4.22 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 ratio. Considering Leidos Holdings’ total assets of $ 12.51 billion, the debt ratio is 0.38. 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 were to rise. Different industries have different tolerances for debt ratios. A debt ratio of 35% could be higher for one sector and average for another.

Why debt matters

Debt is an important factor in a company’s capital structure and can help it grow. Debt generally has a relatively lower cost of financing than equity, making it an attractive option for executives.

However, interest payment obligations can have a negative impact on the company’s cash flow. Having financial leverage also allows companies to use additional capital for their business operations, allowing shareholders to retain excess profits generated by debt capital.

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