A Look Into ClearOne's Debt

Shares of ClearOne Inc. CLRO rose by 130.77% in the past three months. Before having a look at the importance of debt, let's look at how much debt ClearOne has.

ClearOne Debt

Based on ClearOne's balance sheet as of November 14, 2022, long-term debt is at $1.01 million and current debt is at $855 thousand, amounting to $1.86 million in total debt. Adjusted for $1.45 million in cash-equivalents, the company's net debt is at $413 thousand.

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. ClearOne has $57.76 million in total assets, therefore making the debt-ratio 0.03. 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. For example, a debt ratio of 25% might be higher for one industry, but normal for another.

Why Debt Is Important

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.

Interest-payment obligations can impact the cash-flow of the company. 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.