TRANSFORMERS AND Current Financial Leverage

TRANSFORMERS AND'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. TRANSFORMERS AND's financial risk is the risk to TRANSFORMERS AND 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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TRANSFORMERS AND Financial Leverage Rating

TRANSFORMERS AND RECTIFIERS bond ratings play a critical role in determining how much TRANSFORMERS AND 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 TRANSFORMERS AND's borrowing costs.
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TRANSFORMERS AND REC Debt to Cash Allocation

As TRANSFORMERS AND RECTIFIERS follows its natural business cycle, the capital allocation decisions will not magically go away. TRANSFORMERS AND'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 has accumulated 384.17 M in total debt with debt to equity ratio (D/E) of 18.1, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. TRANSFORMERS AND REC has a current ratio of 1.28, suggesting that it may have difficulties to pay its financial obligations in time and when they become due.

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

TRANSFORMERS AND Investors Sentiment

The influence of TRANSFORMERS AND's investor sentiment on the probability of its price appreciation or decline could be a good factor in your decision-making process regarding taking a position in TRANSFORMERS. The overall investor sentiment generally increases the direction of a stock movement in a one-year investment horizon. However, the impact of investor sentiment on the entire stock markets does not have a solid backing from leading economists and market statisticians.
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 TRANSFORMERS AND 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, TRANSFORMERS AND's short interest history, or implied volatility extrapolated from TRANSFORMERS AND options trading.

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TRANSFORMERS AND REC Investor Sentiment

Macroaxis portfolio users are evenly split in their outlook on investing in TRANSFORMERS AND RECTIFIERS. What is your outlook on investing in TRANSFORMERS AND RECTIFIERS? Are you bullish or bearish?
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Check out World Market Map. Note that the TRANSFORMERS AND REC information on this page should be used as a complementary analysis to other TRANSFORMERS AND'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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

Other Tools for TRANSFORMERS Stock

When running TRANSFORMERS AND REC price analysis, check to measure TRANSFORMERS AND'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 TRANSFORMERS AND is operating at the current time. Most of TRANSFORMERS AND's value examination focuses on studying past and present price action to predict the probability of TRANSFORMERS AND's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move TRANSFORMERS AND's price. Additionally, you may evaluate how the addition of TRANSFORMERS AND to your portfolios can decrease your overall portfolio volatility.
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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.
  • 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.