Investors pursuing a solid, dependable stock investment can often be led to UnitedHealth Group Incorporated (NYSE:UNH), a large-cap worth $221.57B. Big corporations are much sought after by risk-averse investors who find diversified revenue streams and strong capital returns attractive. However, the key to their continued success lies in its financial health. This article will examine UnitedHealth Group’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into UNH here. Check out our latest analysis for UnitedHealth Group

How does UNH’s operating cash flow stack up against its debt?

UNH’s debt level has been constant at around $32,984.0M over the previous year comprising of short- and long-term debt. At this current level of debt, UNH’s cash and short-term investments stands at $13,275.0M , ready to deploy into the business. Moreover, UNH has produced cash from operations of $9,795.0M during the same period of time, resulting in an operating cash to total debt ratio of 29.70%, meaning that UNH’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In UNH’s case, it is able to generate 0.3x cash from its debt capital.

Can UNH meet its short-term obligations with the cash in hand?

With current liabilities at $49,252.0M, it appears that the company has not been able to meet these commitments with a current assets level of $30,774.0M, leading to a 0.62x current account ratio. which is under the appropriate industry ratio of 3x.

Is UNH’s debt level acceptable?

With a debt-to-equity ratio of 59.14%, UNH can be considered as an above-average leveraged company. This is common amongst large-cap companies because debt can often be a less expensive alternative to equity due to tax deductibility of interest payments. Since large-caps are seen as safer than their smaller constituents, they tend to enjoy lower cost of capital. We can put the sustainability of UNH’s debt levels to the test by looking at how well interest payments are covered by earnings. Preferably, earnings before interest and tax (EBIT) should be at least three times as large as net interest. For UNH, the ratio of 12.58x suggests that interest is amply covered. Large-cap investments like UNH are often believed to be a safe investment due to their ability to pump out ample earnings multiple times its interest payments.