A Look Into Barnes & Noble Education's Debt

Over the past three months, shares of Barnes & Noble Education Inc. BNED decreased by 47.53%. Before having a look at the importance of debt, let's look at how much debt Barnes & Noble Education has.

Barnes & Noble Education Debt

According to the Barnes & Noble Education's most recent balance sheet as reported on August 31, 2022, total debt is at $260.30 million, with $220.30 million in long-term debt and $40.00 million in current debt. Adjusting for $9.15 million in cash-equivalents, the company has a net debt of $251.15 million.

Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents includes cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Barnes & Noble Education's $1.23 billion in total assets, the debt-ratio is at 0.21. 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 35% might be higher for one industry, but 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. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

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This article was generated by Benzinga's automated content engine and reviewed by an editor.