How Does ON Semiconductor's Debt Look?

Shares of ON Semiconductor Inc. ON increased by 45.16% in the past three months. Before having a look at the importance of debt, let's look at how much debt ON Semiconductor has.

ON Semiconductor's Debt

Based on ON Semiconductor’s financial statement as of May 11, 2020, long-term debt is at $4.04 billion and current debt is at $689.60 million, amounting to $4.73 billion in total debt. Adjusted for $1.98 billion in cash-equivalents, the company's net debt is at $2.75 billion.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. ON Semiconductor has $9.42 billion in total assets, therefore making the debt-ratio 0.5. 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 35% might be higher for one industry, whereas average for another.

Why Debt Is Important

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.

Interest-payment obligations can impact 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.

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: NewsIntraday UpdateMarketsDebt Insights
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!