A Look Into TaskUs's Debt

Shares of TaskUs Inc. TASK increased by 30.47% in the past three months. Before having a look at the importance of debt, let's look at how much debt TaskUs has.

TaskUs's Debt

Based on TaskUs's financial statement as of August 9, 2022, long-term debt is at $179.64 million and current debt is at $86.26 million, amounting to $265.90 million in total debt. Adjusted for $104.73 million in cash-equivalents, the company's net debt is at $161.17 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.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering TaskUs's $883.48 million in total assets, the debt-ratio is at 0.3. 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, but average for another.

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