Quest Diagnostics Debt

DGX Stock  USD 163.32  0.00  0.00%   
Quest Diagnostics holds a debt-to-equity ratio of 0.73. At this time, Quest Diagnostics' Short and Long Term Debt is fairly stable compared to the past year. Debt To Equity is likely to rise to 0.87 in 2024, whereas Short and Long Term Debt Total is likely to drop slightly above 3.1 B in 2024. With a high degree of financial leverage come high-interest payments, which usually reduce Quest Diagnostics' Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

Quest Diagnostics' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Quest Diagnostics' cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Quest Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Quest Diagnostics' stakeholders.

Quest Diagnostics Quarterly Net Debt

6.21 Billion

For most companies, including Quest Diagnostics, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Quest Diagnostics Incorporated, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Quest Diagnostics' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book
2.6628
Book Value
60.795
Operating Margin
0.1419
Profit Margin
0.0882
Return On Assets
0.0566
Given that Quest Diagnostics' debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Quest Diagnostics is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Quest Diagnostics to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Quest Diagnostics is said to be less leveraged. If creditors hold a majority of Quest Diagnostics' assets, the Company is said to be highly leveraged.
Total Current Liabilities is likely to drop to about 1.2 B in 2024. Liabilities And Stockholders Equity is likely to drop to about 8.5 B in 2024
  
Check out the analysis of Quest Diagnostics Fundamentals Over Time.

Quest Diagnostics Bond Ratings

Quest Diagnostics Incorporated financial ratings play a critical role in determining how much Quest Diagnostics have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Quest Diagnostics' borrowing costs.
Piotroski F Score
7
StrongView
Beneish M Score
(2.49)
Unlikely ManipulatorView

Quest Diagnostics Debt to Cash Allocation

As Quest Diagnostics Incorporated follows its natural business cycle, the capital allocation decisions will not magically go away. Quest Diagnostics' decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors.
Quest Diagnostics Incorporated has 5.5 B in debt with debt to equity (D/E) ratio of 0.73, which is OK given its current industry classification. Quest Diagnostics has a current ratio of 1.43, which is typical for the industry and considered as normal. Note however, debt could still be an excellent tool for Quest to invest in growth at high rates of return.

Quest Diagnostics Total Assets Over Time

Quest Diagnostics Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Quest Diagnostics uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Quest Diagnostics Debt Ratio

    
  27.0   
It appears most of the Quest Diagnostics' assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Quest Diagnostics' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Quest Diagnostics, which in turn will lower the firm's financial flexibility.

Quest Diagnostics Corporate Bonds Issued

Quest Short Long Term Debt Total

Short Long Term Debt Total

3.06 Billion

At this time, Quest Diagnostics' Short and Long Term Debt Total is fairly stable compared to the past year.

Understaning Quest Diagnostics Use of Financial Leverage

Understanding the structure of Quest Diagnostics' debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Quest Diagnostics' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its cost of debt.
Last ReportedProjected for Next Year
Short and Long Term Debt Total5.5 B3.1 B
Net Debt4.8 B2.7 B
Short Term Debt456 M255.7 M
Long Term Debt4.4 BB
Long Term Debt Total4.6 B3.9 B
Short and Long Term Debt432 M453.6 M
Net Debt To EBITDA 2.78  1.53 
Debt To Equity 0.75  0.87 
Interest Debt Per Share 43.54  45.71 
Debt To Assets 0.34  0.27 
Long Term Debt To Capitalization 0.41  0.45 
Total Debt To Capitalization 0.43  0.47 
Debt Equity Ratio 0.75  0.87 
Debt Ratio 0.34  0.27 
Cash Flow To Debt Ratio 0.27  0.40 
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Additional Tools for Quest Stock Analysis

When running Quest Diagnostics' price analysis, check to measure Quest Diagnostics' market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Quest Diagnostics is operating at the current time. Most of Quest Diagnostics' value examination focuses on studying past and present price action to predict the probability of Quest Diagnostics' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Quest Diagnostics' price. Additionally, you may evaluate how the addition of Quest Diagnostics to your portfolios can decrease your overall portfolio volatility.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.