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Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Take-Two Interactive Software, Inc. (NASDAQ:TTWO) makes use of debt. But the real question is whether this debt is making the company risky.
What Risk Does Debt Bring?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.
View our latest analysis for Take-Two Interactive Software
What Is Take-Two Interactive Software's Debt?
The image below, which you can click on for greater detail, shows that at December 2024 Take-Two Interactive Software had debt of US$3.66b, up from US$3.08b in one year. On the flip side, it has US$1.21b in cash leading to net debt of about US$2.45b.
How Healthy Is Take-Two Interactive Software's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Take-Two Interactive Software had liabilities of US$2.90b due within 12 months and liabilities of US$4.08b due beyond that. Offsetting this, it had US$1.21b in cash and US$739.4m in receivables that were due within 12 months. So it has liabilities totalling US$5.03b more than its cash and near-term receivables, combined.
Since publicly traded Take-Two Interactive Software shares are worth a very impressive total of US$37.5b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Take-Two Interactive Software's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.