A Look Into Zimmer Biomet Holdings’ Debt – Zimmer Biomet Holdings (NYSE:ZBH)

Zimmer Biomet Holdings (NYSE:ZBH) shares are up 2.50% over the past three months. To understand how a company’s price changes over a period of time, such as three months, it can be helpful to look at its financials. One of the key aspects of a company’s finances is debt, but before we understand the importance of debt, let’s take a look at how much debt Zimmer Biomet Holdings has.

Liabilities of Zimmer Biomet Holdings

Based on Zimmer Biomet Holdings’ financial statements as of May 2, 2023, long-term debt is $5.2 billion, current debt is $585 million, and total debt is $5.79 billion. Adjusted for cash equivalents of $330.2 million, the company’s net debt is $5.46 billion.

Let’s define some of the terms used in the paragraph above. current debt is the portion of the company’s debt that is due within one year. long term debt The portion that is paid for over a year. cash equivalent Includes cash and liquid securities with a maturity of 90 days or less. total debt Equal to current debt plus long-term debt minus cash equivalents.

To understand the extent of a company’s financial leverage, investors look to the debt ratio. Considering Zimmer Biomet Holdings’ total assets of $21.24 billion, the debt ratio is 0.27. As a rule of thumb, a debt-to-equity ratio greater than 1 indicates that a significant portion of the debt is covered by assets. A high debt ratio could also imply that the company could be exposed to the risk of default if interest rates rise. However, debt ratios vary greatly by industry. A debt ratio of 25% may be high in one industry, but average in another.

the importance of debt

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

However, interest payment obligations can affect a company’s cash flow. When a company uses debt capital to run its business, stockholders can retain excess profits arising from the debt capital.

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This article was generated by Benzinga’s automated content engine and reviewed by editors.