Over the past three months, shares of Coca-Cola Europacific Inc. CCEP up 11.64%. To understand a company’s price action over a period of about 3 months, it can be helpful to look at its financials. An important aspect of a company’s finances is its debt, but before we understand the meaning of debt, let’s look at how much debt Coca-Cola Europacific has.

Coca-Cola’s Europacific Debt

Based on Coca-Cola Europacific’s balance sheet as of March 16, 2020, long-term debt is US$6.31 billion and current debt is US$897.04 million, for total debt of US$7.21 billion. equivalent to dollars. Adjusted for $354.77 million in cash equivalents, the company’s net debt is $6.85 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.

Shareholders look at the leverage ratio to understand how much financial leverage a company has. Coca-Cola Europacific has total assets of $20.98 billion, which translates to a debt ratio of 0.34. 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. For example, a debt ratio of 25% may be higher for one industry but normal for another.

Why do shareholders consider debt?

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

However, due to interest payment obligations, a company’s cash flow can be adversely affected. Shareholders can retain excess profit that…