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Over the past three months, shares of Domino’s Pizza Inc. DPZ<\/span> increased by 6.35%. Before having a look at the importance of debt, let’s look at how much debt Domino’s Pizza has.<\/p>\n According to the Domino’s Pizza’s most recent balance sheet as reported on October 13, 2022, total debt is at $5.15 billion, with $5.10 billion in long-term debt and $55.79 million in current debt. Adjusting for $114.78 million in cash-equivalents, the company has a net debt of $5.04 billion.<\/p>\n Let’s define some of the terms we used in the paragraph above. Current debt<\/strong> is the portion of a company’s debt which is due within 1 year, while long-term debt<\/strong> is the portion due in more than 1 year. Cash equivalents<\/strong> includes cash and any liquid securities with maturity periods of 90 days or less. Total debt<\/strong> equals current debt plus long-term debt minus cash equivalents.<\/p>\n To understand the degree of financial leverage a company has, shareholders look at the debt ratio. Considering Domino’s Pizza’s $1.65 billion in total assets, the debt-ratio is at 3.13. Generally speaking, a debt-ratio more than 1 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. For example, a debt ratio of 40% might be higher for one industry, but normal for another.<\/p>\n 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.<\/p>\n 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.<\/p>\n Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform which provides investors with near-instantaneous access to dozens of stock metrics – including debt-to-equity ratio. Click here to learn more<\/a>.<\/p>\nDomino’s Pizza Debt<\/h2>\n
Why Shareholders Look At Debt?<\/h2>\n