Coca-Cola Europacific's Debt Overview

Over the past three months, shares of Coca-Cola Europacific Inc. CCEP increased by 11.64%. 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 balance sheet 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.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Coca-Cola Europacific has $20.98 billion in total assets, therefore making the debt-ratio 0.34. 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.

Why Shareholders Look At Debt?

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, 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.