A Look Into Dave & Buster's Debt

Over the past three months, shares of Dave & Buster's Enter PLAY increased by 6.54%. Before we understand the importance of debt, let us look at how much debt Dave & Buster's Enter has.

Dave & Buster's Enter's Debt

According to the Dave & Buster's Enter’s most recent balance sheet as reported on September 10, 2020, total debt is at $746.65 million, with $731.65 million in long-term debt and $15.00 million in current debt. Adjusting for $224.31 million in cash-equivalents, the company has a net debt of $522.34 million.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Dave & Buster's Enter has $2.62 billion in total assets, therefore making the debt-ratio 0.28. 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 25% might be higher for one industry and normal for another.

Why Debt Is Important

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, interest-payment obligations can have an adverse impact on the cash-flow of the company. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.