Kuo Toong Debt
| 8936 Stock | TWD 49.80 0.20 0.40% |
Kuo Toong International has over 1.36 Billion in debt which may indicate that it relies heavily on debt financing. . Kuo Toong's financial risk is the risk to Kuo Toong stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Kuo Toong'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. Kuo Toong'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 Kuo Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Kuo Toong's stakeholders.
For most companies, including Kuo Toong, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Kuo Toong International, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Kuo Toong's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Kuo Toong'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 Kuo Toong 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 Kuo Toong to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Kuo Toong is said to be less leveraged. If creditors hold a majority of Kuo Toong's assets, the Company is said to be highly leveraged.
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Kuo Toong International Debt to Cash Allocation
Many companies such as Kuo Toong, 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.
Kuo Toong International has accumulated 1.36 B in total debt with debt to equity ratio (D/E) of 61.7, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Kuo Toong International has a current ratio of 1.21, suggesting that it is in a questionable position to pay out its financial obligations in time and when they become due. Debt can assist Kuo Toong until it has trouble settling it off, either with new capital or with free cash flow. So, Kuo Toong'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 Kuo Toong International sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Kuo to invest in growth at high rates of return. When we think about Kuo Toong's use of debt, we should always consider it together with cash and equity.Kuo Toong 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 Kuo Toong's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Kuo Toong, which in turn will lower the firm's financial flexibility.Kuo Toong Corporate Bonds Issued
Understaning Kuo Toong Use of Financial Leverage
Understanding the structure of Kuo Toong's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Kuo Toong's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its cost of debt.
Kuo Toong International Co., Ltd. designs, produces, and assembles water supply and division pipes in Taiwan. Kuo Toong International Co., Ltd. was founded in 1978 and is headquartered in Kaohsiung, Taiwan. KUO TOONG operates under Engineering Construction classification in Taiwan and is traded on Taiwan OTC Exchange. Please read more on our technical analysis page.
Pair Trading with Kuo Toong
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Kuo Toong position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kuo Toong will appreciate offsetting losses from the drop in the long position's value.Moving together with Kuo Stock
Moving against Kuo Stock
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The ability to find closely correlated positions to Kuo Toong could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Kuo Toong when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Kuo Toong - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Kuo Toong International to buy it.
The correlation of Kuo Toong is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Kuo Toong moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Kuo Toong International moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Kuo Toong can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Additional Tools for Kuo Stock Analysis
When running Kuo Toong's price analysis, check to measure Kuo Toong'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 Kuo Toong is operating at the current time. Most of Kuo Toong's value examination focuses on studying past and present price action to predict the probability of Kuo Toong's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Kuo Toong's price. Additionally, you may evaluate how the addition of Kuo Toong to your portfolios can decrease your overall portfolio volatility.
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.