A Look Into J&J Snack Foods' Debt

Over the past three months, shares of J&J Snack Foods Inc. JJSF increased by 12.03%. Before having a look at the importance of debt, let's look at how much debt J&J Snack Foods has.

J&J Snack Foods Debt

Based on J&J Snack Foods's financial statement as of November 22, 2022, long-term debt is at $55.25 million and current debt is at $124 thousand, amounting to $55.38 million in total debt. Adjusted for $35.18 million in cash-equivalents, the company's net debt is at $20.20 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.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. J&J Snack Foods has $1.22 billion in total assets, therefore making the debt-ratio 0.05. 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. For example, a debt ratio of 40% might be higher for one industry, but normal for another.

Importance of Debt

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

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.