Market Overview

Bloomin Brands: Debt Overview

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Over the past three months, shares of Bloomin Brands Inc. (NASDAQ: BLMN) increased by 10.79%. Before having a look at the importance of debt, let's look at how much debt Bloomin Brands has.

Bloomin Brands's Debt

Based on Bloomin Brands’s balance sheet as of July 31, 2020, long-term debt is at $1.18 billion and current debt is at $32.35 million, amounting to $1.21 billion in total debt. Adjusted for $181.43 million in cash-equivalents, the company's net debt is at $1.03 billion.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Bloomin Brands’s $3.43 billion in total assets, the debt-ratio is at 0.35. As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. For example, a debt ratio of 40% might be higher for one industry, whereas normal for another.

Why Investors Look At 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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