NikolaCorp Current Debt

NKLA Stock  USD 0.53  0  0.57%   
NikolaCorp holds a debt-to-equity ratio of 0.537. At present, NikolaCorp's Short Term Debt is projected to increase significantly based on the last few years of reporting. The current year's Debt To Assets is expected to grow to 0.20, whereas Net Debt is forecasted to decline to (190.1 M). With a high degree of financial leverage come high-interest payments, which usually reduce NikolaCorp's Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

NikolaCorp'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. NikolaCorp'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 NikolaCorp Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect NikolaCorp's stakeholders.
For most companies, including NikolaCorp, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running NikolaCorp 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.
Price Book
1.3006
Book Value
0.437
Operating Margin
(19.39)
Return On Assets
(0.35)
Return On Equity
(1.53)
At present, NikolaCorp's Short Term Debt is projected to increase significantly based on the last few years of reporting. The current year's Debt To Assets is expected to grow to 0.20, whereas Net Debt is forecasted to decline to (190.1 M).
  
Check out the analysis of NikolaCorp Fundamentals Over Time.
For information on how to trade NikolaCorp Stock refer to our How to Trade NikolaCorp Stock guide.

NikolaCorp Financial Leverage Rating

NikolaCorp bond ratings play a critical role in determining how much NikolaCorp 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 NikolaCorp's borrowing costs.
Piotroski F Score
5  Healthy
Beneish M Score

NikolaCorp Debt to Cash Allocation

As NikolaCorp follows its natural business cycle, the capital allocation decisions will not magically go away. NikolaCorp'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 284.86 M in liabilities with Debt to Equity (D/E) ratio of 0.54, which is about average as compared to similar companies. NikolaCorp has a current ratio of 1.72, which is within standard range for the sector. Debt can assist NikolaCorp until it has trouble settling it off, either with new capital or with free cash flow. So, NikolaCorp'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 NikolaCorp sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for NikolaCorp to invest in growth at high rates of return. When we think about NikolaCorp's use of debt, we should always consider it together with cash and equity.

NikolaCorp Total Assets Over Time

NikolaCorp 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 NikolaCorp's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of NikolaCorp, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a NikolaCorp debt ratio should be compared their industry average or other competing firms.

NikolaCorp Net Debt

Net Debt

(190.13 Million)

At present, NikolaCorp's Net Debt is projected to decrease significantly based on the last few years of reporting.

Understaning NikolaCorp Use of Financial Leverage

NikolaCorp financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures NikolaCorp'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 NikolaCorp assets, the company is considered highly leveraged. Understanding the composition and structure of overall NikolaCorp 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 NikolaCorp'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 NikolaCorp'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).
Last ReportedProjected for Next Year
Net Debt-181.1 M-190.1 M
Short and Long Term Debt Total284.9 M158 M
Long Term Debt141.4 M112.6 M
Short Term Debt10.8 M17.3 M
Short and Long Term Debt2.6 M2.4 M
Long Term Debt Total335.4 M174.2 M
Net Debt To EBITDA 0.30  0.28 
Debt To Equity 0.35  0.18 
Interest Debt Per Share 0.41  0.22 
Debt To Assets 0.19  0.20 
Long Term Debt To Capitalization 0.25  0.27 
Total Debt To Capitalization 0.26  0.27 
Debt Equity Ratio 0.35  0.18 
Debt Ratio 0.19  0.20 
Cash Flow To Debt Ratio(1.98)(2.07)
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When determining whether NikolaCorp offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of NikolaCorp'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 Nikolacorp Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Nikolacorp Stock:
Check out the analysis of NikolaCorp Fundamentals Over Time.
For information on how to trade NikolaCorp Stock refer to our How to Trade NikolaCorp Stock guide.
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Is NikolaCorp's 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 NikolaCorp. If investors know NikolaCorp 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 NikolaCorp listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Earnings Share
(1.06)
Revenue Per Share
0.033
Quarterly Revenue Growth
(0.30)
Return On Assets
(0.35)
Return On Equity
(1.53)
The market value of NikolaCorp is measured differently than its book value, which is the value of NikolaCorp that is recorded on the company's balance sheet. Investors also form their own opinion of NikolaCorp's value that differs from its market value or its book value, called intrinsic value, which is NikolaCorp'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 NikolaCorp's market value can be influenced by many factors that don't directly affect NikolaCorp's 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 NikolaCorp's value and its price as these two are different measures arrived at by different means. Investors typically determine if NikolaCorp is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, NikolaCorp'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.

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.
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.