Tupperware Brands: Debt Overview

Shares of Tupperware Brands Inc. TUP increased by 288.20% in the past three months. Before having a look at the importance of debt, let's look at how much debt Tupperware Brands has.

Tupperware Brands's Debt

According to the Tupperware Brands’s most recent balance sheet as reported on July 29, 2020, total debt is at $803.60 million, with $2.10 million in long-term debt and $801.50 million in current debt. Adjusting for $120.00 million in cash-equivalents, the company has a net debt of $683.60 million.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Tupperware Brands has $1.19 billion in total assets, therefore making the debt-ratio 0.67. As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. A debt ratio of 35% might be higher for one industry, whereas average for another.

Importance of Debt

Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.

However, due to interest-payment obligations, cash-flow of a company can be impacted. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.