Shares of Alliance Data Systems (NYSE:ADS) decreased by 23.71% in the past three months. Before we understand the importance of debt, let us look at how much debt Alliance Data Systems has.

Alliance Data Systems's Debt

According to the Alliance Data Systems's most recent balance sheet as reported on August 5, 2021, total debt is at $7.36 billion, with $5.70 billion in long-term debt and $1.66 billion in current debt. Adjusting for $3.00 billion in cash-equivalents, the company has a net debt of $4.36 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 include 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.

Why Investors 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, interest-payment obligations can have an adverse impact on the cash-flow of the company. 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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