A Look Into Walgreens Boots Alliance's Debt

Shares of Walgreens Boots Alliance Inc. WBA moved lower by 14.68% in the past three months. Before having a look at the importance of debt, let's look at how much debt Walgreens Boots Alliance has.

Walgreens Boots Alliance Debt

Based on Walgreens Boots Alliance's balance sheet as of January 5, 2023, long-term debt is at $7.79 billion and current debt is at $3.94 billion, amounting to $11.73 billion in total debt. Adjusted for $2.35 billion in cash-equivalents, the company's net debt is at $9.38 billion.

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 Walgreens Boots Alliance's $92.88 billion in total assets, the debt-ratio is at 0.13. 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 35% might be higher for one industry, but average for another.

Why Debt Is Important

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, interest-payment obligations can have an adverse impact on 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.