Cisco Systems (NASDAQ: CSCO) has stabilized its balance sheet and can focus on the future
The balance sheet is a crucial point of review for investors because it provides insight into the flexibility and structural integrity of an organization. This is why we are going to evaluate Cisco Systems, Inc. (NASDAQ: CSCO) financial health and see if they are operating efficiently.
Check out our latest analysis for Cisco Systems
What is the debt of Cisco Systems?
As you can see below, Cisco Systems had US $ 11.5 billion debt in May 2021, up from US $ 16.1 billion the year before. But he also has $ 23.6 billion in cash to make up for that, which means it has $ 12.0 billion in net cash.
A look at the responsibilities of Cisco Systems
Zooming in on the latest balance sheet data, we can see that Cisco Systems had a liability of US $ 24.3 billion owed within 12 months and a liability of US $ 29.4 billion owed beyond that. On the other hand, it had US $ 23.6 billion in cash and US $ 9.34 billion in receivables due in one year. As a result, its liabilities total $ 20.8 billion more than the combination of its cash and short-term receivables. In return, Cisco’s long-term assets amounted to $ 56.8 billion.
A full picture can be seen in the table below:
Of course, Cisco Systems has a large market capitalization of 234.4 billion US dollars, so these liabilities are probably manageable.
Despite its notable liabilities, Cisco Systems has a net cash flow, so it’s fair to say that it doesn’t have a heavy debt load!
But the other side of the story is that Cisco Systems has seen its EBIT drop 6.3% in the past year. This kind of decline, if it continues, will obviously make debt more difficult to manage.
The balance sheet is clearly the area you need to focus on when analyzing debt. But ultimately, the company’s future profitability will decide whether Cisco Systems can strengthen its balance sheet over time.
So if you are focused on the future you can check out this free report showing analysts’ earnings forecasts.
Finally, a business needs free cash flow to pay off debts. The difference between profit and free cash flow is that the former is on the books and the latter is in the bank. Investors should be primarily concerned with cash, as accountants have a lot of freedom to dance around earnings.
Over the past three years, Cisco Systems has actually generated more free cash flow than EBIT. There is nothing better than cash flow to stay in the good graces of your lenders. Now let’s see how Cisco manages its cash flow:
It seems that during the previous period, the largest cash outflows came from financing – which mainly consists of debt repayments. That is why, at the start of our analysis, we say that the debt balance is slowly declining for Cisco. Cash flow from operating activities is fairly constant, indicating that the business has not improved in terms of both growth or operational efficiency. The company also returns money to shareholders through their dividend, which currently has a yield of 2.66%.
While it’s always a good idea to look at a company’s total liabilities, it’s very reassuring that Cisco Systems has $ 12.0 billion in net cash.
It impressed us with free cash flow of US $ 14 billion, or 105% of its EBIT.
The company is stabilizing its debt balance and has become more secure and stable. They can look to the future and work towards growth or maximization of shareholder value. Overall, it seems they have a healthy track record.
So is Cisco Systems’ debt a risk? It does not seem to us. Of course, we wouldn’t say no to the extra confidence we would gain if we knew Cisco Systems insiders are buying stocks: if you’re on the same page, you can find out if any insiders are buying by clicking this. link connect.
At the end of the day, sometimes it’s easier to focus on businesses that don’t even need to go into debt. Readers can access a list of growth stocks with zero net debt 100% free, at present.
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Simply Wall St analyst Goran Damchevski and Simply Wall St have no positions in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents.
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