John B Sanfilippo & Son: Debt Overview

Shares of John B Sanfilippo & Son JBSS decreased by 9.14% in the past three months. Before having a look at the importance of debt, let us look at how much debt John B Sanfilippo & Son has.

John B Sanfilippo & Son's Debt

According to the John B Sanfilippo & Son's most recent financial statement as reported on August 18, 2021, total debt is at $24.48 million, with $10.86 million in long-term debt and $13.62 million in current debt. Adjusting for $672.00 thousand in cash-equivalents, the company has a net debt of $23.80 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 John B Sanfilippo & Son's $398.45 million in total assets, the debt-ratio is at 0.06. Generally speaking, a debt-ratio more than one means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 25% might be higher for one industry and 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. 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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