A Look Into Pulmonx's Debt

Shares of Pulmonx Inc. LUNG decreased by 71.09% in the past three months. Before we understand the importance of debt, let's look at how much debt Pulmonx has.

Pulmonx's Debt

Based on Pulmonx's balance sheet as of August 8, 2022, long-term debt is at $14.46 million and current debt is at $2.92 million, amounting to $17.38 million in total debt. Adjusted for $121.95 million in cash-equivalents, the company's net debt is at $-104 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 includes 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. Pulmonx has $212.73 million in total assets, therefore making the debt-ratio 0.08. Generally speaking, a debt-ratio more than 1 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 40% might be higher for one industry, but 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.

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.

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This article was generated by Benzinga's automated content engine and reviewed by an editor.