These 4 Measures Indicate That Coca-Cola Consolidated (NASDAQ:COKE) Is Using Debt Reasonably Well
The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Coca-Cola Consolidated, Inc. (NASDAQ:COKE) does carry debt. But should shareholders be worried about its use of debt?
Why Does Debt Bring Risk?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
How Much Debt Does Coca-Cola Consolidated Carry?
As you can see below, Coca-Cola Consolidated had US$1.79b of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$1.68b in cash offsetting this, leading to net debt of about US$106.9m.
How Strong Is Coca-Cola Consolidated's Balance Sheet?
According to the last reported balance sheet, Coca-Cola Consolidated had liabilities of US$1.39b due within 12 months, and liabilities of US$2.64b due beyond 12 months. Offsetting these obligations, it had cash of US$1.68b as well as receivables valued at US$710.8m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$1.64b.
Of course, Coca-Cola Consolidated has a titanic market capitalization of US$14.4b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Carrying virtually no net debt, Coca-Cola Consolidated has a very light debt load indeed.
View our latest analysis for Coca-Cola Consolidated
We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
With debt at a measly 0.094 times EBITDA and EBIT covering interest a whopping 43.0 times, it's clear that Coca-Cola Consolidated is not a desperate borrower. Indeed relative to its earnings its debt load seems light as a feather. The good news is that Coca-Cola Consolidated has increased its EBIT by 5.4% over twelve months, which should ease any concerns about debt repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Coca-Cola Consolidated will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. During the last three years, Coca-Cola Consolidated produced sturdy free cash flow equating to 60% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Our View
The good news is that Coca-Cola Consolidated's demonstrated ability to cover its interest expense with its EBIT delights us like a fluffy puppy does a toddler. And the good news does not stop there, as its net debt to EBITDA also supports that impression! Zooming out, Coca-Cola Consolidated seems to use debt quite reasonably; and that gets the nod from us. After all, sensible leverage can boost returns on equity. Over time, share prices tend to follow earnings per share, so if you're interested in Coca-Cola Consolidated, you may well want to click here to check an interactive graph of its earnings per share history.
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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