What Does Coca-Cola Europacific's Debt Look Like?

Over the past three months, shares of Coca-Cola Europacific Inc. CCEP moved higher by 3.26%. When understanding a companies price change over a time period like 3 months, it could be helpful to look at its financials. One key aspect of a companies financials is its debt, but before we understand the importance of debt, let's look at how much debt Coca-Cola Europacific has.

Coca-Cola Europacific Debt

Based on Coca-Cola Europacific's financial statement as of March 16, 2020, long-term debt is at $6.31 billion and current debt is at $897.04 million, amounting to $7.21 billion in total debt. Adjusted for $354.77 million in cash-equivalents, the company's net debt is at $6.85 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 Coca-Cola Europacific's $20.98 billion in total assets, the debt-ratio is at 0.34. 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.

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