Church & Dwight Debt Overview

Actions of Church and Dwight Co (NYSE: CHD) has risen 17.80% in the past three months. Before understanding the importance of debt, let’s take a look at the debt amount of Church & Dwight Co.

Church & Dwight Co Debt

According to Church & Dwight Co’s latest financial statement released on October 29, 2021, total debt stands at $ 1.79 billion, with $ 1.21 billion in long-term debt and $ 579.30 million in current debt. Adjusted for $ 180.00 million in cash equivalents, the company has net debt of $ 1.61 billion.

Let’s define some of the terms we used in the paragraph above. Short-term debt is the portion of a company’s debt that matures within one year, while long-term debt is the portion over one year. Cash equivalents include cash and all liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

To understand a company’s degree of financial leverage, shareholders look at the debt ratio. Considering Church & Dwight Co’s total assets of $ 7.38 billion, the debt ratio is 0.24. Generally speaking, a debt ratio greater than one means that a large part of the debt is financed with assets. As the debt ratio rises, the risk of default increases if interest rates rise. Different industries have different tolerance levels for debt ratios. A debt ratio of 25% may be higher for one industry and normal for another.

Why debt matters

Besides equity, debt is an important factor in a company’s capital structure and contributes to its growth. Due to its lower cost of funding relative to equity, it becomes an attractive option for executives trying to raise capital.

However, due to interest payment obligations, a company’s cash flow can be affected. Stock owners can keep excess profits, generated by debt capital, when companies use debt capital for their business operations.

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Jerry B. Hatch