Pembina Pipeline Current Debt
| P5P Stock | EUR 34.36 0.19 0.55% |
Pembina Pipeline Corp has over 10 Billion in debt which may indicate that it relies heavily on debt financing. . Pembina Pipeline's financial risk is the risk to Pembina Pipeline stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Pembina Pipeline'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. Pembina Pipeline'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 Pembina Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Pembina Pipeline's stakeholders.
For most companies, including Pembina Pipeline, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Pembina Pipeline Corp, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Pembina Pipeline's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Pembina Pipeline'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 Pembina Pipeline 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 Pembina Pipeline to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Pembina Pipeline is said to be less leveraged. If creditors hold a majority of Pembina Pipeline's assets, the Company is said to be highly leveraged.
Pembina |
Pembina Pipeline Corp Debt to Cash Allocation
Many companies such as Pembina Pipeline, 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.
Pembina Pipeline Corp has accumulated 10 B in total debt with debt to equity ratio (D/E) of 55.6, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Pembina Pipeline Corp has a current ratio of 0.59, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist Pembina Pipeline until it has trouble settling it off, either with new capital or with free cash flow. So, Pembina Pipeline'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 Pembina Pipeline Corp sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Pembina to invest in growth at high rates of return. When we think about Pembina Pipeline's use of debt, we should always consider it together with cash and equity.Pembina Pipeline 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 Pembina Pipeline's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Pembina Pipeline, which in turn will lower the firm's financial flexibility.Understaning Pembina Pipeline Use of Financial Leverage
Pembina Pipeline financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Pembina Pipeline'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 Pembina Pipeline assets, the company is considered highly leveraged. Understanding the composition and structure of overall Pembina Pipeline 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 Pembina Pipeline'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 Pembina Pipeline'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).
Pembina Pipeline Corporation provides transportation and midstream services for the energy industry in North America. Pembina Pipeline Corporation was founded in 1997 and is headquartered in Calgary, Canada. PEMBINA PIPELINE operates under Oil Gas Midstream classification in Germany and is traded on Frankfurt Stock Exchange. It employs 2162 people. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in Pembina Stock
When determining whether Pembina Pipeline Corp offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Pembina Pipeline's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Pembina Pipeline Corp Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Pembina Pipeline Corp Stock:Check out the analysis of Pembina Pipeline Fundamentals Over Time. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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.