Over the past three months, shares of FLJ Group Inc. (NASDAQ:FLJ) decreased by 61.54%. Before having a look at the importance of debt, let's look at how much debt FLJ Group has.

FLJ Group Debt

According to the FLJ Group's most recent balance sheet as reported on February 15, 2022, total debt is at $169.43 million, with $79.91 million in long-term debt and $89.52 million in current debt. Adjusting for $2.53 million in cash-equivalents, the company has a net debt of $166.90 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. FLJ Group has $58.61 million in total assets, therefore making the debt-ratio 2.89. 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?

Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.

However, due to interest-payment obligations, cash-flow of a company can be impacted. 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.