A look at CVS Health’s debt ratio


Actions of CVS Health (NYSE: CVS) has fallen 5.94% in the past three months. Before we look at the importance of debt, let’s take a look at CVS Health’s debt amount.

CVS Health’s debt

According to CVS Health’s most recent balance sheet released on August 5, 2020, total debt stands at $ 71.67 billion, with $ 63.48 billion in long-term debt and $ 8.19 billion in debt. current. Adjusted for $ 14.87 billion in cash equivalents, the company has net debt of $ 56.80 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 is owed less than a 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, investors look at the debt ratio. Considering CVS Health’s total assets of $ 235.50 billion, the debt-to-equity ratio is 0.3. 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 25% may be higher for one industry and normal for another.

Why are investors interested in 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.

However, due to interest payment obligations, a company’s cash flow can be affected. Having financial leverage also allows companies to use additional capital for their business operations, allowing stock owners to keep excess profits generated by debt capital.

Are you looking for stocks with a low debt ratio? Check out Benzinga Pro, a market research platform that gives investors near instant access to dozens of stock market metrics, including the debt ratio. Click here to find out more.

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John A. Bogar

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