GM Corporate Bonds and Leverage Analysis

GM -  USA Stock  

USD 57.28  1.79  3.23%

GM's 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. GM's financial risk is the risk to GM 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).
Please check the analysis of GM Fundamentals Over Time.

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GM Issuance Repayment of Debt Securities is relatively stable at the moment as compared to the past year. The company's current value of Issuance Repayment of Debt Securities is estimated at 7.64 Billion. Debt to Equity Ratio is expected to hike to 4.36 this year, although the value of Total Debt will most likely fall to nearly 93.4 B.

GM Current Financial Burden

GM'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. GM'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 GM Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect GM's stakeholders.

Asset vs Debt

Equity vs Debt

Given the importance of GM's capital structure, the first step in the capital decision process is for the management of GM 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 General Motors to issue bonds at a reasonable cost.

GM Bond Ratings

General Motors bond ratings play a critical role in determining how much GM 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 GM's borrowing costs.
Overall Bond Rating
Tolerable
Average S&P Rating
BBB-
Piotroski F Score
7  Strong
Beneish M Score

General Motors Debt to Cash Allocation

As General Motors follows its natural business cycle, the capital allocation decisions will not magically go away. GM'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 reports 112.19 B of total liabilities with total debt to equity ratio (D/E) of 2.06, which may imply that the company relies heavily on debt financing. General Motors has a current ratio of 1.06, indicating that it is not liquid enough and may have problems paying out its debt commitments in time.

GM Inventories Over Time

GM Assets Financed by Debt

The debt-to-assets ratio shows the degree to which GM 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.

GM Debt Ratio

    
  39.88   
It appears without question that nearly 60% of GM's assets are financed through equity. 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 GM's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of GM, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a GM debt ratio should be compared their industry average or other competing firms.
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GM Corporate Bonds Issued

GM issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. General Motors uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most GM bonds can be classified according to their maturity, which is the date when General Motors has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Issue DateMaturityCouponRef Coupon  Rating
GENERAL MTRS 487507/22/201410/02/20234.8752.25
BBB-
GENERAL MTRS 62507/22/201410/02/20436.253.0
BBB-
GENERAL MTRS 411/12/201404/01/20254.02.25
BBB-
GENERAL MTRS 511/12/201404/01/20355.05.375
BBB-
GENERAL MTRS 5211/12/201404/01/20455.23.0
BBB-
GENERAL MTRS FINL02/03/201405/15/20234.252.25
BBB-
GENERAL MTRS FINL09/25/201409/25/20214.3752.0
BBB-
GENERAL MTRS FINL01/12/201501/15/20254.02.0
BBB-
GENERAL MTRS FINL04/10/201504/10/20223.452.0
BBB-

General Motors Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of GM, understanding its historical liability is critical in projecting GM's 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 GM uses its financing power over time.

Understaning GM Use of Financial Leverage

GM financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures GM'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 GM assets, the company is considered highly leveraged. Understanding the composition and structure of overall GM 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.
Please read more on our technical analysis page.
Last ReportedProjected for 2021
Total Debt109.9 B93.4 B
Debt Current36.9 B30.9 B
Debt Non Current73 B62.4 B
Issuance Repayment of Debt Securities6.1 B7.6 B
Long Term Debt to Equity 1.62  1.30 
Debt to Equity Ratio 4.12  4.36 
General Motors Company designs, builds, and sells cars, trucks, crossovers, and automobile parts worldwide. General Motors Company was founded in 1908 and is headquartered in Detroit, Michigan. GM operates under Auto Manufacturers classification in the United States and is traded on New York Stock Exchange. It employs 155000 people.

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Please check the analysis of GM Fundamentals Over Time. Note that the General Motors information on this page should be used as a complementary analysis to other GM'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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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When running General Motors price analysis, check to measure GM'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 GM is operating at the current time. Most of GM's value examination focuses on studying past and present price action to predict the probability of GM's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move GM's price. Additionally, you may evaluate how the addition of GM to your portfolios can decrease your overall portfolio volatility.
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The market value of General Motors is measured differently than its book value, which is the value of GM that is recorded on the company's balance sheet. Investors also form their own opinion of GM's value that differs from its market value or its book value, called intrinsic value, which is GM's 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 GM's market value can be influenced by many factors that don't directly affect General Motors underlying business (such as pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between GM's value and its price as these two are different measures arrived at by different means. Investors typically determine GM value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, GM'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.