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Shares of Sherwin-Williams Inc. SHW<\/span> increased by 8.48% in the past three months. Before having a look at the importance of debt, let’s look at how much debt Sherwin-Williams has.<\/p>\n According to the Sherwin-Williams’s most recent balance sheet as reported on October 25, 2022, total debt is at $10.53 billion, with $9.59 billion in long-term debt and $945.80 million in current debt. Adjusting for $130.50 million in cash-equivalents, the company has a net debt of $10.40 billion.<\/p>\n Let’s define some of the terms we used in the paragraph above. Current debt<\/strong> is the portion of a company’s debt which is due within 1 year, while long-term debt<\/strong> is the portion due in more than 1 year. Cash equivalents<\/strong> includes cash and any liquid securities with maturity periods of 90 days or less. Total debt<\/strong> equals current debt plus long-term debt minus cash equivalents.<\/p>\n To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Sherwin-Williams’s $22.25 billion in total assets, the debt-ratio is at 0.47. Generally speaking, a debt-ratio more than 1 means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. For example, a debt ratio of 25% might be higher for one industry, but normal for another.<\/p>\n Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.<\/p>\n However, interest-payment obligations can have an adverse impact on the cash-flow of the company. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.<\/p>\n Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform which provides investors with near-instantaneous access to dozens of stock metrics – including debt-to-equity ratio. Click here to learn more<\/a>.<\/p>\nSherwin-Williams Debt<\/h2>\n
Why Debt Is Important<\/h2>\n