Jack Henry & Associates: Debt Insights

Over the past three months, shares of Jack Henry & Associates JKHY moved higher by 10.96%. Before we understand the importance of debt, let us look at how much debt Jack Henry & Associates has.

Jack Henry & Associates's Debt

Based on Jack Henry & Associates's financial statement as of May 7, 2021, long-term debt is at $200.12 million and current debt is at $117.00 thousand, amounting to $200.24 million in total debt. Adjusted for $70.12 million in cash-equivalents, the company's net debt is at $130.12 million.

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.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Jack Henry & Associates's $2.21 billion in total assets, the debt-ratio is at 0.09. 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 35% might be higher for one industry and normal for another.

Importance Of 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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