Company debt: read the repayment calendar
A debt total does not tell you when the money must be repaid. Two companies owing the same amount can face different pressures if one has a large repayment next month and the other has several years to prepare.
$80 million due, $15 million in cash
Suppose a business has $100 million of debt and $15 million of cash. If $80 million falls due next year, the research needs to examine cash generation, available facilities and refinancing. The same debt spread over ten years creates a different schedule.
Interest costs also depend on terms. A fixed-rate borrowing and a floating-rate loan can respond differently to changing market rates. Read the note describing rates, collateral and repayment dates.
Look beyond a single ratio
Check covenants and any restrictions on distributions or additional borrowing. The accounting debt figure may not capture every relevant obligation; leases and guarantees deserve separate attention.
Compare the company’s cash needs with the cash it can generate under less favourable sales conditions. A forecast assuming uninterrupted growth should not be the only scenario in the folder.
A clear research review keeps the maturity table beside earnings and cash flow. A strong profit margin does not pay a debt by itself when customers have not yet paid the company.
Finally, distinguish access to funding from funding already committed. Management saying it expects to refinance is different from a completed refinancing. Record the announcement date and revisit the terms when a transaction closes.