Walgreens Boots Alliance Inc stock WBA down 14.68% over the past three months. Before we look at the importance of debt, let’s look at how much debt Walgreens Boots Alliance has.

Walgreens Boots Alliance Debt

Based on the Walgreens Boots Alliance balance sheet as of January 5, 2023, long-term debt is $7.79 billion and current debt is $3.94 billion, for total debt of $11.73 billion is equivalent to. Adjusted for $2.35 billion in cash, the company’s net debt is $9.38 billion.

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.

To understand a company’s level of financial leverage, investors look at the leverage ratio. Considering the total assets of Walgreens Boots Alliance of $92.88 billion, the debt ratio is 0.13. In general, a debt ratio greater than 1 means that a large portion of the debt is funded by assets. As the debt ratio increases, so does the risk of default on a loan when interest rates rise. Different industries have different tolerance levels for debt ratios. A debt ratio of 35% may be higher for one industry but average for another.

Why Debt Matters

Debt is an important factor in a company’s capital structure and can contribute to growth. Debt typically has relatively lower funding costs than equity, making it an attractive option for executives.

However, interest payment obligations may adversely affect the Company’s cash flow. Shareholders can keep excess profits from the debt when companies use the debt for their operations.

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