Benzinga | Aug 31, 2020 08:18AM EDT

How Does Omeros's Debt Look?

Over the past three months, shares of Omeros Inc. (NASDAQ:OMER) moved lower by 13.52%. Before having a look at the importance of debt, let's look at how much debt Omeros has.

Omeros's Debt

Based on Omeros's balance sheet as of August 10, 2020, long-term debt is at $164.46 million and current debt is at $1.20 million, amounting to $165.65 million in total debt. Adjusted for $1.96 million in cash-equivalents, the company's net debt is at $163.69 million.

Investors look at the debt-ratio to understand how much financial leverage a company has. Omeros has $70.69 million in total assets, therefore making the debt-ratio 2.34. 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 35% might be higher for one industry, whereas average for another.

Importance of 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.