What Does Brown & Brown's Debt Look Like?

Shares of Brown & Brown BRO rose by 2.70% in the past three months. Before we understand the importance of debt, let us look at how much debt Brown & Brown has.

Brown & Brown's Debt

According to the Brown & Brown's most recent financial statement as reported on April 27, 2021, total debt is at $2.08 billion, with $2.01 billion in long-term debt and $70.00 million in current debt. Adjusting for $678.74 million in cash-equivalents, the company has a net debt of $1.40 billion.

Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents include cash and any liquid securities 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 how much financial leverage a company has. Brown & Brown has $8.91 billion in total assets, therefore making the debt-ratio 0.23. As a rule of thumb, a debt-ratio more than one 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 25% might be higher for one industry and average for another.

Why Shareholders Look At Debt?

Debt is an important factor in the capital structure of a company, and can help it attain growth. Debt usually has a relatively lower financing cost than equity, which makes it an attractive option for executives.

Interest-payment obligations can impact the cash-flow of the company. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

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