What Does Okta's Debt Look Like?

Shares of Okta Inc. OKTA increased by 35.11% in the past three months. Before having a look at the importance of debt, let's look at how much debt Okta has.

Okta Debt

Based on Okta's balance sheet as of December 1, 2022, long-term debt is at $2.19 billion and current debt is at $5.22 million, amounting to $2.20 billion in total debt. Adjusted for $249.62 million in cash-equivalents, the company's net debt is at $1.95 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.

Investors look at the debt-ratio to understand how much financial leverage a company has. Okta has $9.09 billion in total assets, therefore making the debt-ratio 0.24. 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 35% might be higher for one industry, but normal for another.

Importance of 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. 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.