Knight-Swift: Debt Insights

Over the past three months, shares of Knight-Swift KNX moved higher by 22.49%. Before we understand the importance of debt, let us look at how much debt Knight-Swift has.

Knight-Swift's Debt

According to the Knight-Swift's most recent balance sheet as reported on November 3, 2021, total debt is at $2.10 billion, with $2.03 billion in long-term debt and $78.27 million in current debt. Adjusting for $269.69 million in cash-equivalents, the company has a net debt of $1.83 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.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Knight-Swift's $10.35 billion in total assets, the debt-ratio is at 0.2. As a rule of thumb, a debt-ratio more than one 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 and average for another.

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.

Interest-payment obligations can impact 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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