Debt doesn’t matter, until it does

There are some key ratios and other metrics regarding a company’s debt that investors should consider.

By Simon Brown

i write a lot about debt, especially how it doesn’t matter until it does. When things are going well, paying the interest and repaying the debt is easy. But then something goes wrong, like a pandemic, and suddenly that pile of debt is critical and potentially ruinous for a company. When talking about company debt, the focus is on key ratios, such as debt to equity and interest cover. These are all very important, but they have two shortcomings. Firstly, they’re a snapshot at a specific time from the end of the reporting period when financial results are released. And secondly, they don’t give any detail into the actual debt profile of the company. This latter point is what I want to focus on. The first important question when talking about a…

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Finweek - English (Digital) - 1 Issue, 3/4/2021

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