Cheesecake Factory Debt

CAKE Stock  USD 49.74  0.89  1.82%   
The Cheesecake Factory has over 1.86 Billion in debt which may indicate that it relies heavily on debt financing. At present, Cheesecake Factory's Net Debt is projected to increase significantly based on the last few years of reporting. The current year's Short Term Debt is expected to grow to about 283.3 M, whereas Short and Long Term Debt is forecasted to decline to about 105.7 M. . Cheesecake Factory's financial risk is the risk to Cheesecake Factory stockholders that is caused by an increase in debt.

Asset vs Debt

Equity vs Debt

Cheesecake Factory's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Cheesecake Factory's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Cheesecake Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Cheesecake Factory's stakeholders.
For most companies, including Cheesecake Factory, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for The Cheesecake Factory, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Cheesecake Factory's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book
6.2902
Book Value
7.781
Operating Margin
0.0361
Profit Margin
0.0363
Return On Assets
0.0388
At present, Cheesecake Factory's Non Current Liabilities Total is projected to increase significantly based on the last few years of reporting. The current year's Non Current Liabilities Other is expected to grow to about 73.5 M, whereas Total Current Liabilities is forecasted to decline to about 200.5 M.
  
Check out the analysis of Cheesecake Factory Fundamentals Over Time.

Cheesecake Factory Bond Ratings

The Cheesecake Factory financial ratings play a critical role in determining how much Cheesecake Factory have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Cheesecake Factory's borrowing costs.
Piotroski F Score
6
HealthyView
Beneish M Score
(3.62)
Unlikely ManipulatorView

The Cheesecake Factory Debt to Cash Allocation

Many companies such as Cheesecake Factory, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The Cheesecake Factory currently holds 1.86 B in liabilities with Debt to Equity (D/E) ratio of 5.0, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. The Cheesecake Factory has a current ratio of 0.62, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Note, when we think about Cheesecake Factory's use of debt, we should always consider it together with its cash and equity.

Cheesecake Factory Total Assets Over Time

Cheesecake Factory Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Cheesecake Factory uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Cheesecake Factory Debt Ratio

    
  10.0   
It looks as if most of the Cheesecake Factory's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Cheesecake Factory's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Cheesecake Factory, which in turn will lower the firm's financial flexibility.

Cheesecake Factory Corporate Bonds Issued

Most Cheesecake bonds can be classified according to their maturity, which is the date when The Cheesecake Factory has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.

Cheesecake Short Long Term Debt Total

Short Long Term Debt Total

1.95 Billion

At present, Cheesecake Factory's Short and Long Term Debt Total is projected to increase significantly based on the last few years of reporting.

Understaning Cheesecake Factory Use of Financial Leverage

Cheesecake Factory's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Cheesecake Factory's total debt position, including all outstanding debt obligations, and compares it with Cheesecake Factory's equity. Financial leverage can amplify the potential profits to Cheesecake Factory's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Cheesecake Factory is unable to cover its debt costs.
Last ReportedProjected for Next Year
Short and Long Term Debt Total1.9 BB
Net Debt1.8 B1.9 B
Short Term Debt269.8 M283.3 M
Long Term Debt470 M151.8 M
Short and Long Term Debt136.4 M105.7 M
Long Term Debt Total322 M162.2 M
Net Debt To EBITDA 8.89  6.73 
Debt To Equity 1.90  0.51 
Interest Debt Per Share 12.70  6.66 
Debt To Assets 0.21  0.10 
Long Term Debt To Capitalization 0.60  0.34 
Total Debt To Capitalization 0.66  0.34 
Debt Equity Ratio 1.90  0.51 
Debt Ratio 0.21  0.10 
Cash Flow To Debt Ratio 0.36  0.75 
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When determining whether The Cheesecake Factory is a strong investment it is important to analyze Cheesecake Factory's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Cheesecake Factory's future performance. For an informed investment choice regarding Cheesecake Stock, refer to the following important reports:
Check out the analysis of Cheesecake Factory Fundamentals Over Time.
You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Is Hotels, Restaurants & Leisure space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Cheesecake Factory. If investors know Cheesecake will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Cheesecake Factory listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
0.649
Dividend Share
1.08
Earnings Share
2.69
Revenue Per Share
74.077
Quarterly Revenue Growth
0.042
The market value of The Cheesecake Factory is measured differently than its book value, which is the value of Cheesecake that is recorded on the company's balance sheet. Investors also form their own opinion of Cheesecake Factory's value that differs from its market value or its book value, called intrinsic value, which is Cheesecake Factory's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Cheesecake Factory's market value can be influenced by many factors that don't directly affect Cheesecake Factory's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Cheesecake Factory's value and its price as these two are different measures arrived at by different means. Investors typically determine if Cheesecake Factory is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Cheesecake Factory's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.