Cardiff Oncology Current Financial Leverage
XE7C Stock | EUR 4.01 0.17 4.07% |
Cardiff Oncology holds a debt-to-equity ratio of 0.002. Cardiff Oncology's financial risk is the risk to Cardiff Oncology 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
Cardiff Oncology'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. Cardiff Oncology'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 Cardiff Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Cardiff Oncology's stakeholders.
For most companies, including Cardiff Oncology, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Cardiff Oncology 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 Cardiff Oncology'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 Cardiff Oncology 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 Cardiff Oncology to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Cardiff Oncology is said to be less leveraged. If creditors hold a majority of Cardiff Oncology's assets, the Company is said to be highly leveraged.
Cardiff |
Cardiff Oncology Financial Leverage Rating
Cardiff Oncology bond ratings play a critical role in determining how much Cardiff Oncology 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 Cardiff Oncology's borrowing costs.Cardiff Oncology Debt to Cash Allocation
As Cardiff Oncology follows its natural business cycle, the capital allocation decisions will not magically go away. Cardiff Oncology'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 408 K in total debt with debt to equity ratio (D/E) of 0.0, which may suggest the company is not taking enough advantage from borrowing. Cardiff Oncology has a current ratio of 30.58, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist Cardiff Oncology until it has trouble settling it off, either with new capital or with free cash flow. So, Cardiff Oncology'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 Cardiff Oncology sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Cardiff to invest in growth at high rates of return. When we think about Cardiff Oncology's use of debt, we should always consider it together with cash and equity.Cardiff Oncology 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 Cardiff Oncology's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Cardiff Oncology, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Cardiff Oncology debt ratio should be compared their industry average or other competing firms.Understaning Cardiff Oncology Use of Financial Leverage
Cardiff Oncology financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Cardiff Oncology'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 Cardiff Oncology assets, the company is considered highly leveraged. Understanding the composition and structure of overall Cardiff Oncology 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 Cardiff Oncology'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 Cardiff Oncology'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).
Cardiff Oncology, Inc., a clinical-stage biotechnology company, develops drugs for the treatment of cancer. Cardiff Oncology, Inc. was incorporated in 1999 and is headquartered in San Diego, California. CARDIFF ONCOLOG operates under Biotechnology classification in Germany and is traded on Frankfurt Stock Exchange. It employs 11 people. Please read more on our technical analysis page.
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Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.When determining whether Cardiff Oncology is a strong investment it is important to analyze Cardiff Oncology's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Cardiff Oncology's future performance. For an informed investment choice regarding Cardiff Stock, refer to the following important reports:Check out the analysis of Cardiff Oncology Fundamentals Over Time. For more detail on how to invest in Cardiff Stock please use our How to Invest in Cardiff Oncology guide.Note that the Cardiff Oncology information on this page should be used as a complementary analysis to other Cardiff Oncology'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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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When running Cardiff Oncology's price analysis, check to measure Cardiff Oncology'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 Cardiff Oncology is operating at the current time. Most of Cardiff Oncology's value examination focuses on studying past and present price action to predict the probability of Cardiff Oncology's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Cardiff Oncology's price. Additionally, you may evaluate how the addition of Cardiff Oncology 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.
- 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.