Fomento De Current Financial Leverage

FMOCY Stock  USD 1.88  0.00  0.00%   
Fomento De Construcciones holds a debt-to-equity ratio of 1.073. Fomento De's financial risk is the risk to Fomento De stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

Fomento De'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. Fomento De'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 Fomento Pink Sheet's retail investors understand whether an upcoming fall or rise in the market will negatively affect Fomento De's stakeholders.
For most companies, including Fomento De, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Fomento De Construcciones the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Given that Fomento De's debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Fomento De is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Fomento De to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Fomento De is said to be less leveraged. If creditors hold a majority of Fomento De's assets, the Company is said to be highly leveraged.
  
Check out the analysis of Fomento De Fundamentals Over Time.

Fomento De Financial Leverage Rating

Fomento De Construcciones bond ratings play a critical role in determining how much Fomento De 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 Fomento De's borrowing costs.

Fomento De Construcciones Debt to Cash Allocation

As Fomento De Construcciones follows its natural business cycle, the capital allocation decisions will not magically go away. Fomento De's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies 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 company has accumulated 3.26 B in total debt with debt to equity ratio (D/E) of 1.07, which is about average as compared to similar companies. Fomento De Construcciones has a current ratio of 1.39, which is within standard range for the sector. Debt can assist Fomento De until it has trouble settling it off, either with new capital or with free cash flow. So, Fomento De's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Fomento De Construcciones sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Fomento to invest in growth at high rates of return. When we think about Fomento De's use of debt, we should always consider it together with cash and equity.

Fomento De Assets Financed by Debt

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 Fomento De's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Fomento De, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Fomento De debt ratio should be compared their industry average or other competing firms.

Understaning Fomento De Use of Financial Leverage

Fomento De financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Fomento De's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Fomento De assets, the company is considered highly leveraged. Understanding the composition and structure of overall Fomento De debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to Fomento De's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Fomento De's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Fomento de Construcciones y Contratas, S.A., together with its subsidiaries, engages in the environmental services, water management, and infrastructure development businesses in Europe and internationally. Fomento de Construcciones y Contratas, S.A. is a subsidiary of Control Empresarial de Capitales, S.A. de C.V. Fomento DE operates under Waste Management classification in the United States and is traded on OTC Exchange. It employs 61834 people.
Please read more on our technical analysis page.

Building efficient market-beating portfolios requires time, education, and a lot of computing power!

The Portfolio Architect is an AI-driven system that provides multiple benefits to our users by leveraging cutting-edge machine learning algorithms, statistical analysis, and predictive modeling to automate the process of asset selection and portfolio construction, saving time and reducing human error for individual and institutional investors.

Try AI Portfolio Architect
Check out the analysis of Fomento De Fundamentals Over Time.
Note that the Fomento De Construcciones information on this page should be used as a complementary analysis to other Fomento De's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

Complementary Tools for Fomento Pink Sheet analysis

When running Fomento De's price analysis, check to measure Fomento De's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Fomento De is operating at the current time. Most of Fomento De's value examination focuses on studying past and present price action to predict the probability of Fomento De's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Fomento De's price. Additionally, you may evaluate how the addition of Fomento De to your portfolios can decrease your overall portfolio volatility.
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Please note, there is a significant difference between Fomento De's value and its price as these two are different measures arrived at by different means. Investors typically determine if Fomento De is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Fomento De'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.