GameStop’s Inc. shares GME fell 17.92% over the past three months. Before we look at what debt means, let’s look at how much GameStop owes.

GameStop debt

Based on GameStop’s balance sheet as of September 7, 2022, long-term debt is $32.10 million and current debt is $8.90 million for total debt of $41.00 million. Adjusted for $908.90 million in cash, the company’s net debt is -$867 million.

Let’s define some of the terms we used in the paragraph above. Current Debt is that portion of a company’s debt that falls due within one year, during Long-term liabilities is the portion due in more than 1 year. cash equivalents includes cash and all liquid securities with maturities of 90 days or less. total debt equals current liabilities plus non-current liabilities minus cash equivalents.

To understand a company’s level of financial leverage, shareholders look at the leverage ratio. Considering GameStop’s total assets of $2.80 billion, the debt ratio is 0.01. As a rule of thumb, a debt ratio greater than 1 indicates that a significant portion of the debt is funded by assets. A higher leverage ratio can also mean that the company faces default risk if interest rates rise. However, leverage ratios vary widely across different industries. A debt ratio of 35% may be higher for one industry but average for another.

Why Debt Matters

In addition to equity, borrowed capital is an important factor in the capital structure of a company and contributes to its growth. The lower cost of financing compared to equity makes it an attractive option for executives trying to raise capital.

Interest payment obligations may affect the company’s cash flow. Shareholders can keep excess profits from the debt when companies use the debt for their operations.

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