Echo Therapeutics Current Financial Leverage

ECTE -  USA Stock  

USD 0.0002  0.00  0.00%

Echo Therapeutics' financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Echo Therapeutics' financial risk is the risk to Echo Therapeutics 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).
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Echo Therapeutics Bonds 

 
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Echo Therapeutics Debt Current is projected to increase significantly based on the last few years of reporting. The past year's Debt Current was at 379,500. The current year Debt Non Current is expected to grow to about 151.6 K, whereas Issuance Repayment of Debt Securities is forecasted to decline to about 257.7 K.

Echo Therapeutics Current Financial Burden

Echo Therapeutics' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Echo Therapeutics' 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 Echo Therapeutics Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Echo Therapeutics' stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Echo Therapeutics, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Echo Therapeutics 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 Echo Therapeutics' 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 Echo Therapeutics 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 Echo Therapeutics to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Echo Therapeutics is said to be less leveraged. If creditors hold a majority of Echo Therapeutics' assets, the company is said to be highly leveraged.

Echo Therapeutics Quarterly Debt to Equity Ratio

(1.171)Share
Given the importance of Echo Therapeutics' capital structure, the first step in the capital decision process is for the management of Echo Therapeutics to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Echo Therapeutics to issue bonds at a reasonable cost.

Echo Therapeutics Financial Leverage Rating

Echo Therapeutics bond ratings play a critical role in determining how much Echo Therapeutics 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 Echo Therapeutics' borrowing costs.
Overall Bond Rating
Not Rated
Average S&P Rating
N/A
Piotroski F Score
3  Frail
Beneish M Score

Echo Therapeutics Debt to Cash Allocation

As Echo Therapeutics follows its natural business cycle, the capital allocation decisions will not magically go away. Echo Therapeutics' 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 3.52 M in liabilities with Debt to Equity (D/E) ratio of 0.03, which may suggest the company is not taking enough advantage from borrowing. Echo Therapeutics has a current ratio of 0.05, indicating that it has a negative working capital and may not be able to pay financial obligations when due.

Echo Therapeutics Total Assets Over Time

Echo Therapeutics Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Echo Therapeutics 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.

Echo Therapeutics Debt Ratio

    
  55.06   
It looks as if about 44% of Echo Therapeutics' assets are financed be 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 Echo Therapeutics' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Echo Therapeutics, which in turn will lower the firm's financial flexibility. Like all other financial ratios, an Echo Therapeutics debt ratio should be compared their industry average or other competing firms.
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Echo Therapeutics Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Echo Therapeutics, understanding its historical liability is critical in projecting Echo Therapeutics' future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how Echo Therapeutics uses its financing power over time.
In order to fund their growth, businesses such as Echo Therapeutics widely use Financial Leverage. For most companies, financial capital is raised by issuing debt securities and by selling common stock. The debt and equity that make up Echo Therapeutics' capital structure have many risks and return implications. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. Please note, 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.

Understaning Echo Therapeutics Use of Financial Leverage

Echo Therapeutics financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Echo Therapeutics'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 Echo Therapeutics assets, the company is considered highly leveraged. Understanding the composition and structure of overall Echo Therapeutics 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.
Last ReportedProjected for 2021
Total Debt379.5 K409.5 K
Debt Current379.5 K409.5 K
Debt Non Current140.5 K151.6 K
Issuance Repayment of Debt Securities297 K257.7 K
Debt to Equity Ratio(1.19) (1.22) 
Echo Therapeutics, Inc. engages in the development of transdermal skin permeation and diagnostic medical devices for wearable-health consumer and diabetes outpatient markets. The company was founded in 1989 and is headquartered in Iselin, New Jersey. Echo Therapeutics operates under Medical Devices classification in the United States and is traded on OTC Exchange. It employs 19 people.
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Our tools can tell you how much better you can do entering a position in Echo Therapeutics without increasing your portfolio risk or giving up expected return. As an individual investor, you need to find a reliable way to track all your investment portfolios. However, your requirements will often be based on how much of the process you decide to do yourself. In addition to allowing all investors analytical transparency into all their portfolios, our tools can evaluate.risk-adjusted returns of your individual positions relative to your overall portfolio.

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Pair Trading with Echo Therapeutics

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 Echo Therapeutics 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 Echo Therapeutics will appreciate offsetting losses from the drop in the long position's value.

Echo Therapeutics Pair Correlation

Equities Pair Trading Analysis

Correlation analysis and pair trading evaluation for Echo Therapeutics and Eargo Inc. Pair trading can be used as a hedging technique within a particular sector or industry or even over random equities to generate better risk-adjusted return
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Continue to Investing Opportunities. Note that the Echo Therapeutics information on this page should be used as a complementary analysis to other Echo Therapeutics' 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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When running Echo Therapeutics price analysis, check to measure Echo Therapeutics' 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 Echo Therapeutics is operating at the current time. Most of Echo Therapeutics' value examination focuses on studying past and present price action to predict the probability of Echo Therapeutics' future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Echo Therapeutics' price. Additionally, you may evaluate how the addition of Echo Therapeutics to your portfolios can decrease your overall portfolio volatility.
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Is Echo Therapeutics' industry 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 Echo Therapeutics. If investors know Echo Therapeutics 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 Echo Therapeutics listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Echo Therapeutics is measured differently than its book value, which is the value of Echo Therapeutics that is recorded on the company's balance sheet. Investors also form their own opinion of Echo Therapeutics' value that differs from its market value or its book value, called intrinsic value, which is Echo Therapeutics' 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 Echo Therapeutics' market value can be influenced by many factors that don't directly affect Echo Therapeutics' 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 Echo Therapeutics' value and its price as these two are different measures arrived at by different means. Investors typically determine Echo Therapeutics value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Echo Therapeutics' 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.
  • 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.