Over the past three months, shares in Gladstone Commercial Inc. GOOD increased by 22.72%. Before we look at the importance of debt, let’s look at how much debt Gladstone Commercial has.

Gladstone trade debt

According to Gladstone Commercial’s latest financial report, reported on November 7, 2022, total debt is $741.76 million, with $375.37 million in long-term debt and $366.39 million in arrears ongoing debt. Adjusted for $13.54 million in cash, the company has net debt of $728.22 million.

Let’s define some of the terms we used in the paragraph above. Current Debt is that portion of a company’s debt that falls due within one year, during Long-term liabilities is the portion due in more than 1 year. cash equivalents includes cash and all liquid securities with maturities of 90 days or less. total debt equals current liabilities plus non-current liabilities minus cash equivalents.

Shareholders look at the leverage ratio to understand how much financial leverage a company has. Gladstone Commercial has total assets of $1.21 billion, which translates to a debt ratio of 0.61. As a rule of thumb, a debt ratio greater than 1 indicates that a significant portion of the debt is funded by assets. A higher leverage ratio can also mean that the company faces default risk if interest rates rise. However, leverage ratios vary widely across different industries. For example, a 35% debt ratio may be higher for one industry but normal for another.

Why do shareholders consider debt?

In addition to equity, borrowed capital is an important factor in the capital structure of a company and contributes to its growth. The lower cost of financing compared to equity makes it an attractive option for executives trying to raise capital.

However, due to interest payment obligations, a company’s cash flow can be adversely affected. Shareholders can keep excess profits from the debt if companies use the debt for their operations.

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