Capstone Green Current Financial Leverage
| CGRNDelisted Stock | USD 0.20 0.05 20.00% |
Capstone Green Energy holds a debt-to-equity ratio of 0.0. Capstone Green's financial risk is the risk to Capstone Green 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).
Given that Capstone Green'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 Capstone Green 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 Capstone Green to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Capstone Green is said to be less leveraged. If creditors hold a majority of Capstone Green's assets, the Company is said to be highly leveraged.
Capstone |
Capstone Green Financial Leverage Rating
Capstone Green Energy bond ratings play a critical role in determining how much Capstone Green 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 Capstone Green's borrowing costs.Capstone Green Energy Debt to Cash Allocation
As Capstone Green Energy follows its natural business cycle, the capital allocation decisions will not magically go away. Capstone Green'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 currently holds 57.43 M in liabilities. Capstone Green Energy has a current ratio of 1.76, which is within standard range for the sector. Debt can assist Capstone Green until it has trouble settling it off, either with new capital or with free cash flow. So, Capstone Green'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 Capstone Green Energy sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Capstone to invest in growth at high rates of return. When we think about Capstone Green's use of debt, we should always consider it together with cash and equity.Capstone Green 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 Capstone Green's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Capstone Green, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Capstone Green debt ratio should be compared their industry average or other competing firms.Understaning Capstone Green Use of Financial Leverage
Capstone Green financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Capstone Green'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 Capstone Green assets, the company is considered highly leveraged. Understanding the composition and structure of overall Capstone Green 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 Capstone Green'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 Capstone Green'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).
Capstone Green Energy Corporation develops, manufactures, markets, and services microturbine technology solutions for use in stationary distributed power generation and distribution networks applications worldwide. Capstone Green Energy Corporation was founded in 1988 and is headquartered in Van Nuys, California. Capstone Green operates under Specialty Industrial Machinery classification in the United States and is traded on NASDAQ Exchange. It employs 133 people. Please read more on our technical analysis page.
Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards Capstone Green in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, Capstone Green's short interest history, or implied volatility extrapolated from Capstone Green options trading.
Pair Trading with Capstone Green
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Capstone Green position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Capstone Green will appreciate offsetting losses from the drop in the long position's value.Moving against Capstone Stock
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The ability to find closely correlated positions to Capstone Green could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Capstone Green when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Capstone Green - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Capstone Green Energy to buy it.
The correlation of Capstone Green is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Capstone Green moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Capstone Green Energy moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Capstone Green can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Check out Trending Equities to better understand how to build diversified portfolios. Also, note that the market value of any company could be tightly coupled with the direction of predictive economic indicators such as signals in metropolitan statistical area. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Consideration for investing in Capstone Stock
If you are still planning to invest in Capstone Green Energy check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Capstone Green's history and understand the potential risks before investing.
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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.