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Shares of FlexShopper Inc. FPAY moved lower by 56.75% in the past three months. Before having a look at the importance of debt, let’s look at how much debt FlexShopper has.

FlexShopper’s Debt

Based on FlexShopper’s balance sheet as of August 10, 2022, long-term debt is at $66.76 million and current debt is at $1.36 million, amounting to $68.11 million in total debt. Adjusted for $4.99 million in cash-equivalents, the company’s net debt is at $63.12 million.

Let’s define some of the terms we used in the paragraph above. Current debt is the portion of a company’s debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents includes cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

Investors look at the debt-ratio to understand how much financial leverage a company has. FlexShopper has $120.01 million in total assets, therefore making the debt-ratio 0.57. As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. A debt ratio of 40% might be higher for one industry, but average for another.

Why Investors Look At Debt?

Debt is an important factor in the capital structure of a company, and can help it attain growth. Debt usually has a relatively lower financing cost than equity, which makes it an attractive option for executives.

Interest-payment obligations can impact 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.

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.

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


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