Mattel's Debt Overview

Shares of Mattel Inc. MAT increased by 30.82% in the past three months. Before having a look at the importance of debt, let's look at how much debt Mattel has.

Mattel's Debt

According to the Mattel’s most recent financial statement as reported on May 6, 2020, total debt is at $3.00 billion, with $2.85 billion in long-term debt and $150.00 million in current debt. Adjusting for $499.41 million in cash-equivalents, the company has a net debt of $2.50 billion.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Mattel has $4.80 billion in total assets, therefore making the debt-ratio 0.62. Generally speaking, a debt-ratio more than 1 means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 25% might be higher for one industry, whereas average for another.

Importance of Debt

Debt is an important factor in the capital structure of a company, and can help it attain growth. Debt usually has a relatively lower financing cost than equity, which makes it an attractive option for executives.

However, due to interest-payment obligations, cash-flow of a company can be impacted. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.