Dixie Debt
| DXYNDelisted Stock | USD 0.79 0.28 54.90% |
Dixie Group holds a debt-to-equity ratio of 1.82. With a high degree of financial leverage come high-interest payments, which usually reduce Dixie's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Dixie'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. Dixie's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the OTC Stock is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Dixie OTC Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Dixie's stakeholders.
For most companies, including Dixie, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for The Dixie Group, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Dixie'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 Dixie's debt-to-equity ratio measures a OTC Stock's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Dixie 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 Dixie to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Dixie is said to be less leveraged. If creditors hold a majority of Dixie's assets, the OTC Stock is said to be highly leveraged.
Dixie |
Dixie Group Debt to Cash Allocation
The Dixie Group currently holds 112.53 M in liabilities with Debt to Equity (D/E) ratio of 1.82, which is about average as compared to similar companies. Dixie Group has a current ratio of 2.81, suggesting that it is liquid enough and is able to pay its financial obligations when due. Debt can assist Dixie until it has trouble settling it off, either with new capital or with free cash flow. So, Dixie'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 Dixie Group sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Dixie to invest in growth at high rates of return. When we think about Dixie's use of debt, we should always consider it together with cash and equity.Dixie 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 Dixie's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Dixie, which in turn will lower the firm's financial flexibility.Dixie Corporate Bonds Issued
Understaning Dixie Use of Financial Leverage
Leverage ratios show Dixie's total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Dixie's financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
The Dixie Group, Inc. manufactures, markets, and sells floorcovering products to residential customers in North America and internationally. The company was founded in 1920 and is based in Dalton, Georgia. Dixie operates under Textile Manufacturing classification in the United States and is traded on NASDAQ Exchange. It employs 1322 people. Please read more on our technical analysis page.
Check out Investing Opportunities to better understand how to build diversified portfolios. Also, note that the market value of any otc stock could be closely tied with the direction of predictive economic indicators such as signals in manufacturing. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Consideration for investing in Dixie OTC Stock
If you are still planning to invest in Dixie Group check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Dixie's history and understand the potential risks before investing.
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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.