A Look Into Dine Brands Global Debt

Shares of Dine Brands Global DIN rose by 17.51% in the past three months. Before having a look at the importance of debt, let us look at how much debt Dine Brands Global has.

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Dine Brands Global's Debt

According to the Dine Brands Global's most recent financial statement as reported on March 2, 2021, total debt is at $1.62 billion, with $1.59 billion in long-term debt and $24.29 million in current debt. Adjusting for $383.37 million in cash-equivalents, the company has a net debt of $1.23 billion.

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 include 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.

To understand the degree of financial leverage a company has, investors look at the debt ratio. Considering Dine Brands Global's $2.07 billion in total assets, the debt-ratio is at 0.78. 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 average 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, 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.

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