How Does Caesars Entertainment's Debt Look?

Over the past three months, shares of Caesars Entertainment CZR moved higher by 50.57%. Before having a look at the importance of debt, let us look at how much debt Caesars Entertainment has.

Caesars Entertainment's Debt

According to the Caesars Entertainment’s most recent balance sheet as reported on August 6, 2020, total debt is at $3.68 billion, with $3.65 billion in long-term debt and $36.61 million in current debt. Adjusting for $950.48 million in cash-equivalents, the company has a net debt of $2.73 billion.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Caesars Entertainment’s $6.15 billion in total assets, the debt-ratio is at 0.6. Generally speaking, a debt-ratio more than one 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 40% might be higher for one industry and normal for another.

Why Debt Is Important

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. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.