MingZhu Logistics Hldgs' Debt Overview

Over the past three months, shares of MingZhu Logistics Hldgs Inc. YGMZ moved lower by 12.62%. Before having a look at the importance of debt, let's look at how much debt MingZhu Logistics Hldgs has.

MingZhu Logistics Hldgs Debt

According to the MingZhu Logistics Hldgs's most recent financial statement as reported on May 11, 2022, total debt is at $10.64 million, with $380 thousand in long-term debt and $10.26 million in current debt. Adjusting for $5.75 million in cash-equivalents, the company has a net debt of $4.89 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 MingZhu Logistics Hldgs's $82.35 million in total assets, the debt-ratio is at 0.13. 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 25% might be higher for one industry, but average 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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This article was generated by Benzinga's automated content engine and reviewed by an editor.