How Does Barnes & Noble Education's Debt Look?

Shares of Barnes & Noble Education BNED moved higher by 108.61% in the past three months. Before having a look at the importance of debt, let us look at how much debt Barnes & Noble Education has.

Barnes & Noble Education's Debt

According to the Barnes & Noble Education's most recent balance sheet as reported on March 9, 2021, total debt is at $150.80 million, with $150.80 million in long-term debt and $0.00 in current debt. Adjusting for $9.91 million in cash-equivalents, the company has a net debt of $140.88 million.

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.

Investors look at the debt-ratio to understand how much financial leverage a company has. Barnes & Noble Education has $1.29 billion in total assets, therefore making the debt-ratio 0.12. 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 40% 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.

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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