A look at Barnes & Noble Education’s debt

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Over the past three months, the actions of Barnes & Noble Education (NYSE: BNED) rose 5.09%. Before looking at the importance of debt, let’s take a look at the debt amount of Barnes & Noble Education.

The debt of Barnes & Noble Education

According to Barnes & Noble Education’s most recent balance sheet released on March 9, 2021, total debt stands at $ 150.80 million, with $ 150.80 million in long-term debt and $ 0.00 in debt. current. Adjusted for $ 9.91 million in cash equivalents, the company has net debt of $ 140.88 million.

Let’s define some of the terms we used in the paragraph above. Short-term debt is the portion of a company’s debt that is owed less than a year, while long-term debt is the portion over one year. Cash equivalents include cash and any liquid security with a maturity of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

Shareholders look at the debt ratio to understand a company’s financial leverage. Barnes & Noble Education has total assets of $ 1.29 billion, making the debt ratio of 0.12. Generally speaking, a debt ratio greater than one means that a large part of the debt is financed by assets. As the debt ratio rises, the risk of default increases if interest rates rise. Different industries have different tolerance thresholds for debt ratios. A debt ratio of 35% may be higher for one industry and normal for another.

Significance of debt

Besides equity, debt is an important factor in a company’s capital structure and contributes to its growth. Due to its lower cost of financing compared to equity, it becomes an attractive option for executives trying to raise capital.

However, due to interest payment obligations, a company’s cash flow can be affected. Having financial leverage also allows companies to use additional capital for their business operations, allowing shareholders to retain excess profits generated by debt capital.

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