What Does Amphenol's Debt Look Like?

Over the past three months, shares of Amphenol Inc. APH moved lower by 6.90%. Before having a look at the importance of debt, let's look at how much debt Amphenol has.

Amphenol Debt

Based on Amphenol's balance sheet as of February 8, 2023, long-term debt is at $4.58 billion and current debt is at $2.70 million, amounting to $4.58 billion in total debt. Adjusted for $1.37 billion in cash-equivalents, the company's net debt is at $3.20 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, shareholders look at the debt ratio. Considering Amphenol's $15.33 billion 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. For example, a debt ratio of 40% might be higher for one industry, but normal for another.

Why Shareholders Look At Debt?

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.

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.