Shares of SoFi Technologies' Inc. (NASDAQ:SOFI) moved lower by 24.89% in the past three months. Before having a look at the importance of debt, let's look at how much debt SoFi Technologies' has.

SoFi Technologies' Debt

According to the SoFi Technologies''s most recent financial statement as reported on November 9, 2022, total debt is at $4.61 billion, with $45.73 million in long-term debt and $4.57 billion in current debt. Adjusting for $935.16 million in cash-equivalents, the company has a net debt of $3.68 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.

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, interest-payment obligations can have an adverse impact on 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.

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This article was generated by Benzinga's automated content engine and reviewed by an editor.