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Nikola Corporation’s Total Debt Vs Cash On Hand

The Nikola Motor’s Reckless Military. Flickr Image.

Other than Tesla (NASDAQ:TSLA), another company that has just got on the electric vehicle bandwagon recently and is worth taking a look at is Nikola Corporation (NASDAQ:NKLA).

Unlike Tesla, Nikola is an EV player focusing on large trucks specifically designed for hauling.

Aside from being all-electric, Nikola’s trucks also use hydrogen to power the vehicles in addition to an onboard battery.

All told, in this article, we will dive into Nikola Corporation’s leverage by looking at the company’s total debt and compare it with its cash on hand.

Moreover, we will also look at some debt ratios such as the debt to equity ratio, debt to asset ratio, and total liabilities to total assets ratio to help in our analysis of the company’s leverage.

Let’s get started!

Nikola’s Total Debt And Cash On Hand

Nikola's debt outstanding and cash on hand

Nikola’s debt outstanding and cash on hand

* Total debt includes both short and long-term interest-bearing debt obtained from Nikola’s balance sheets.
* Cash on hand includes both cash & cash equivalents and restricted cash obtained from Nikola’s balance sheets.
* Nikola’s fiscal year begins on Jan 1 and ends on Dec 31.

The chart above shows the comparison of Nikola’s total debt outstanding and the amount of total cash on hand.

As of fiscal 1Q 2021 ended on March 31, Nikola’s total debt outstanding has gone down to nil, meaning that the company did not have any short or long-term interest-bearing debt based on the latest financial result.

On the other hand, Nikola’s total cash on hand totaled as much as $764 million as shown in the chart above.

Nikola’s cash on hand comes from cash and cash equivalents as well as restricted cash.

However, as of fiscal 1Q 2021, Nikola’s cash on hand came entirely from cash and cash equivalent as restricted cash has been totally wiped out in the latest fiscal quarter.

Nikola’s Total Liabilities And Cash On Hand

Nikola's total liabilities and cash on hand

Nikola’s total liabilities and cash on hand

* Total liabilities include all things owed to 3rd parties including all debt, accounts payable, accrued expenses, leases, tax liabilities, etc., obtained from Nikola’s balance sheets.
* Cash on hand includes both cash & cash equivalents and restricted cash obtained from Nikola’s balance sheets.
* Nikola’s fiscal year begins on Jan 1 and ends on Dec 31.

While Nikola’s debt outstanding has gone to $0, it still carried a significant amount of liabilities in its balance sheets.

As of fiscal Q1 2021, Nikola’s total liabilities reached more than $90 million, a 23% year-over-year increase.

Of the $91 million total liabilities, a significant portion of that came from current liabilities which totaled slightly more than $70 million as of fiscal 1Q 2021.

Despite the increasing total liabilities in the latest quarter, Nikola’s $764 million cash reserves were more than sufficient to cover the entire liabilities multiple times, including both the short and long-term portions.

Therefore, there is really nothing to worry about Nikola’s debt outstanding and liabilities at the moment.

Nikola’s Total Debt To Equity Ratio

Nikola's total debt to equity ratio

Nikola’s total debt to equity ratio

* Total debt to equity ratio is calculated by the author and is based on the total debt figure and shareholders’ equity obtained from Nikola’s balance sheets.
* Nikola’s fiscal year begins on Jan 1 and ends on Dec 31.

Since Nikola’s debt outstanding was nil as of fiscal 1Q 2021, the respective debt to equity ratio was also nil in the same quarter.

In the past few quarters, Nikola’s debt to equity ratio had also been considerably low at only 0.4%.

For your information, Nikola’s total shareholders’ equity averaged more than $900 million in the last several quarters and hence, the low debt to equity ratio.

In fiscal 1Q 2021, most of Nikola’s equity was made up of cash and cash equivalents, suggesting that the company was cash-rich.

Nikola’s Total Debt To Asset Ratio

Nikola's total debt to assets ratio

Nikola’s total debt to assets ratio

* Total debt to asset ratio is calculated by the author and is based on the total debt figure and total assets obtained from Nikola’s balance sheets.
* Nikola’s fiscal year begins on Jan 1 and ends on Dec 31.

Similarly, Nikola’s debt to assets ratio was also amounted to nil as of fiscal Q1 2021 due to the zero debt outstanding in the same quarter.

In the last few quarters, Nikola’s debt to assets ratio had also been considerably low at 0.4%.

For your information, Nikola had assets totaling more than $1 billion in the last several quarters and the latest figure shows that the company also carried more than $1 billion of total assets as of fiscal 2021 Q1.

Most of Nikola’s assets came from the company’s cash and cash equivalents as of fiscal 1Q 2021 which totaled $764 million.

Nikola’s Total Liabilities To Equity Ratio

Nikola's total liabilities to equity ratio

Nikola’s total liabilities to equity ratio

* Total liabilities to equity ratio is calculated by the author and is based on total liabilities and shareholders’ equity obtained from Nikola’s balance sheets.
* Nikola’s fiscal year begins on Jan 1 and ends on Dec 31.

The total liabilities to equity ratio which is shown in the chart above illustrates the company’s total leverages with respect to stockholders’ equity or the book value.

The total liabilities include not only total debt but also all current and long-term liabilities such as accounts payable, accrued expenses as well as deferred tax liabilities.

According to the chart above, Nikola Corporation has a total liabilities to equity ratio of only 10% as of fiscal Q1 2021, indicating that the company was minimally leveraged.

At this ratio, Nikola Corporation has only $0.10 dollar of liabilities for every $1 dollar of equity, leaving the company with plenty of net assets such as cash that can be used to fund its operation.

Nikola’s Total Liabilities To Asset Ratio

Nikola's total liabilities to assets ratio

Nikola’s total liabilities to assets ratio

* Total liabilities to assets ratio is calculated by the author and is based on total liabilities and total assets obtained from Nikola’s balance sheets.
* Nikola’s fiscal year begins on Jan 1 and ends on Dec 31.

The total liabilities to asset ratio illustrate the company’s capital structure.

The ratio tells us about the proportion of the company’s assets that are funded by liabilities.

For example, the graph above shows that Nikola’s capital structure was only 9% liabilities, with the rest making up of stockholders’ equity in fiscal 1Q 2021.

The best part about Nikola’s capital structure was that it was almost made up of cash assets which we saw earlier.

At this ratio, Nikola’s total assets or total funds were $0.09 dollars of liabilities for every $1 dollar of assets.

The rest of Nikola’s capital structure was made up of equity or net assets such as cash, receivables, inventory, buildings, machinery, etc.

In short, Nikola carries very little to no liabilities as of 2021 1Q.

Conclusion

In summary, Nikola Corporation did not carry any debt as of Q1 2021, making the company’s debt leverage at an all-time low.

More importantly, the company’s balance sheet was entirely made up of stockholders’ equity which was comprised of mostly cash and cash equivalents in fiscal 2021 Q1.

As of 2021 Q1, Nikola Corporation has cash assets that totaled as much as $764 million, which was more than enough to pay for the company’s entire liabilities in the same fiscal quarter.

Nikola’s capital or debt structure ratio of 9% indicates that the company’s asset base was 91% of stockholders’ equity, including cash reserves that amounted to $764 million as of fiscal Q1 2021.

In short, Nikola Corporation was a cash-rich company as of fiscal Q1 2021.

References and Credits

1. All financial figures in this article were obtained and referenced from Nikola Corporation’s financial statements available at Nikola Motor’s SEC Filings.

2. Featured images in this article are used under creative commons license and sourced from the following websites: Nikola Two Semi Truck and Nikola Motors Reckless Military.

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