Question

what are ways that Kraft/Heinz could cut there 42.9% debt ratio

Answer 1

Before answering this question we must know that what is debt ratio.

Debt ratio:- Debt ratio is also known as solvency ratio that measures a firms total liablities as a percentage of its total assets. In a sense debt ratio shows a company ability to pay off its liablities with its assets it means how much company sells its assets in order to pay their liablities.

The kraft heinz company is an american food company formed by merger of kraft foods and heinz based chicago,illonois and pittsburgh pennsylvania.

These days kraft heinz facing worst days the company wrote down the value of its kraft and oscar mayer brands by 15 billion dollar posted a 12.6 billion loss cuts its dividend by 36% and announced its accounting practice are under investigation by the security and exchange commission.

KHC stock plunged as much as 20% in after trading.And the company is facing debt ratio of 42.9%. So these are the way that company can cut their debt ratio.

1. Issuing New stock:- The company can issue new or additional shares to increase the cash flow . This cash can be used to repay the existing liablities and in turn reduce the debt burden . The reduction in debt will lower the debt to total assets ratio.

2. Debt equity swap:- This is simplest way to make company debt holder an equity shareholder in the company. This will cancel the debt owed to him and in turn reduce the debt of the company and can improve the ratio.

3. Lease Assets:- The company can lease their assets and then lease them back . This will induce a cash flow that can be used to pay off some debts.

4. Increase the sales:- Kraft heinz company is world wide so if company will increase their sales worldwide without any increase in overall expenses. The increase in sales can be used to reduce the debt and improve the debt to total assets ratio.

So these are the following ways that KHC can cut their total debt ratio.