What Does Cintas' Debt Look Like?

Shares of Cintas Inc. CTAS increased by 1.52% in the past three months. Before having a look at the importance of debt, let's look at how much debt Cintas has.

Cintas Debt

Based on Cintas's financial statement as of April 6, 2023, long-term debt is at $2.49 billion and current debt is at $249.05 million, amounting to $2.74 billion in total debt. Adjusted for $88.56 million in cash-equivalents, the company's net debt is at $2.65 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 Cintas's $8.47 billion in total assets, the debt-ratio is at 0.32. 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. For example, a debt ratio of 25% might be higher for one industry, but normal for another.

Importance of 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. 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.