Market Overview

A Look Into Caesars Entertainment's Debt

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Shares of Caesars Entertainment (NASDAQ: CZR) rose by 43.22% in the past three months. 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 financial statement 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, shareholders look at the debt ratio. Considering Caesars Entertainment’s $6.15 billion in total assets, the debt-ratio is at 0.6. As a rule of thumb, a debt-ratio more than one 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. A debt ratio of 25% might be higher for one industry and average 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.

Interest-payment obligations can impact the cash-flow of the company. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.

 

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