Heritage Crystal Current Financial Leverage
| HCCIDelisted Stock | USD 45.51 0.00 0.00% |
Heritage Crystal Clean holds a debt-to-equity ratio of 0.547. Heritage Crystal's financial risk is the risk to Heritage Crystal 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
Heritage Crystal'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. Heritage Crystal'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 Heritage Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Heritage Crystal's stakeholders.
For most companies, including Heritage Crystal, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Heritage Crystal Clean 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 Heritage Crystal'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 Heritage Crystal 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 Heritage Crystal to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Heritage Crystal is said to be less leveraged. If creditors hold a majority of Heritage Crystal's assets, the Company is said to be highly leveraged.
Heritage |
Heritage Crystal Financial Leverage Rating
Heritage Crystal Clean bond ratings play a critical role in determining how much Heritage Crystal 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 Heritage Crystal's borrowing costs.Heritage Crystal Clean Debt to Cash Allocation
As Heritage Crystal Clean follows its natural business cycle, the capital allocation decisions will not magically go away. Heritage Crystal'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 217.4 M in liabilities with Debt to Equity (D/E) ratio of 0.55, which is about average as compared to similar companies. Heritage Crystal Clean has a current ratio of 0.87, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Debt can assist Heritage Crystal until it has trouble settling it off, either with new capital or with free cash flow. So, Heritage Crystal'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 Heritage Crystal Clean sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Heritage to invest in growth at high rates of return. When we think about Heritage Crystal's use of debt, we should always consider it together with cash and equity.Heritage Crystal 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 Heritage Crystal's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Heritage Crystal, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Heritage Crystal debt ratio should be compared their industry average or other competing firms.Understaning Heritage Crystal Use of Financial Leverage
Heritage Crystal financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Heritage Crystal'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 Heritage Crystal assets, the company is considered highly leveraged. Understanding the composition and structure of overall Heritage Crystal 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 Heritage Crystal'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 Heritage Crystal'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).
Heritage-Crystal Clean, Inc., through its subsidiary, Heritage-Crystal Clean, LLC, provides parts cleaning, hazardous and non-hazardous waste, and used oil collection services to small and mid-sized customers in the industrial and vehicle maintenance sectors in the United States and Canada. Heritage-Crystal Clean, Inc. was incorporated in 2007 and is headquartered in Elgin, Illinois. Heritage Crystal operates under Waste Management classification in the United States and is traded on NASDAQ Exchange. It employs 1296 people. Please read more on our technical analysis page.
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Try AI Portfolio ArchitectCheck out Risk vs Return Analysis 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 main economic indicators. Note that the Heritage Crystal Clean information on this page should be used as a complementary analysis to other Heritage Crystal'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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Consideration for investing in Heritage Stock
If you are still planning to invest in Heritage Crystal Clean 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 Heritage Crystal'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.