America Movil SAB Corporate Bonds and Leverage Analysis
AMX Stock | USD 14.33 0.15 1.04% |
America Movil SAB holds a debt-to-equity ratio of 1.526. With a high degree of financial leverage come high-interest payments, which usually reduce America Movil's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
America Movil'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. America Movil'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 America Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect America Movil's stakeholders.
For most companies, including America Movil, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for America Movil SAB, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, America Movil's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
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Given the importance of America Movil's capital structure, the first step in the capital decision process is for the management of America Movil to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of America Movil SAB to issue bonds at a reasonable cost.
America Movil Bond Ratings
America Movil SAB financial ratings play a critical role in determining how much America Movil 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 America Movil's borrowing costs.Piotroski F Score | 7 | Strong | View |
Beneish M Score | (4.92) | Unlikely Manipulator | View |
America Movil SAB Debt to Cash Allocation
As America Movil SAB follows its natural business cycle, the capital allocation decisions will not magically go away. America Movil'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.
America Movil SAB has 625.85 B in debt with debt to equity (D/E) ratio of 1.53, which is OK given its current industry classification. America Movil SAB has a current ratio of 0.68, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Note however, debt could still be an excellent tool for America to invest in growth at high rates of return. America Movil 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 America Movil's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of America Movil, which in turn will lower the firm's financial flexibility.America Movil Corporate Bonds Issued
Understaning America Movil Use of Financial Leverage
Understanding the structure of America Movil's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to America Movil'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.
Amrica Mvil, S.A.B. de C.V. provides telecommunications services in Latin America and internationally. Amrica Mvil, S.A.B. de C.V. was incorporated in 2000 and is based in Mexico City, Mexico. America Movil operates under Telecom Services classification in the United States and is traded on New York Stock Exchange. It employs 178399 people. Please read more on our technical analysis page.
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When running America Movil's price analysis, check to measure America Movil'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 America Movil is operating at the current time. Most of America Movil's value examination focuses on studying past and present price action to predict the probability of America Movil's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move America Movil's price. Additionally, you may evaluate how the addition of America Movil 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.