Over the past three months, shares of Lam Research Inc. LRCX increased by 6.21%. 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 Lam Research has.

Lam Research Debt

According to Lam Research’s latest financial report, reported on Jan. 30, 2023, the total debt is US$5.00 billion, of which US$5.00 billion is long-term debt and US$7.23 million is due ongoing debt. Adjusted for $4.48 billion in cash, the company has net debt of $518.57 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.

To understand a company’s level of financial leverage, shareholders look at the leverage ratio. Considering Lam Research’s total assets of $19.21 billion, the debt ratio is 0.26. 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 40% debt ratio may be higher for one industry but normal for another.

meaning of debt

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, due to interest payment obligations, a company’s cash flow can be adversely affected. Through financial leverage, companies can also…