Market Overview

Emerald's Debt Overview

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Over the past three months, shares of Emerald Holding (NYSE: EEX) decreased by 0.00%. Before we understand the importance of debt, let us look at how much debt Emerald Holding has.

Emerald Holding's Debt

Based on Emerald Holding’s financial statement as of August 5, 2020, long-term debt is at $517.50 million and current debt is at $5.70 million, amounting to $523.20 million in total debt. Adjusted for $218.60 million in cash-equivalents, the company's net debt is at $304.60 million.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Emerald Holding’s $1.04 billion in total assets, the debt-ratio is at 0.5. 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 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.

Interest-payment obligations can impact 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.

 

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