What does Omnicom Group’s debt look like?

Over the past three months, the actions of Omnicom Group (NYSE: OMC) was down 13.71%. Before understanding the importance of debt, let’s look at the amount of debt Omnicom Group has.

Omnicom group debt

According to the latest Omnicom group financial statement released on October 27, 2020, the total debt stands at $ 5.79 billion, with $ 5.76 billion in long-term debt and $ 23.60 million in current debt. . Adjusted for $ 3.28 billion in cash equivalents, the company has net debt of $ 2.51 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 Omnicom Group’s total assets of $ 23.78 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 by assets. As the debt ratio rises, the risk of default increases if interest rates rise. Different industries have different tolerance thresholds for debt ratios. A debt ratio of 40% may be higher for one industry and normal for another.

Why do shareholders watch the debt?

Debt is an important factor in a company’s capital structure and can help it achieve growth. Debt generally has a relatively lower cost of financing than equity, making it an attractive option for executives.

Interest payment obligations can have an impact on the company’s cash flow. Stock owners can keep excess profits, generated by debt capital, when companies use debt capital for their business operations.

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