Eucatex SA Debt
| EUCA4 Preferred Stock | BRL 13.50 0.08 0.59% |
Eucatex SA Indstria holds a debt-to-equity ratio of 0.368. . Eucatex SA's financial risk is the risk to Eucatex SA stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Eucatex SA'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. Eucatex SA'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 Eucatex Preferred Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Eucatex SA's stakeholders.
For most companies, including Eucatex SA, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Eucatex SA Indstria, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Eucatex SA'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 Eucatex SA'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 Eucatex SA 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 Eucatex SA to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Eucatex SA is said to be less leveraged. If creditors hold a majority of Eucatex SA's assets, the Company is said to be highly leveraged.
Eucatex |
Eucatex SA Indstria Debt to Cash Allocation
Many companies such as Eucatex SA, 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.
Eucatex SA Indstria has accumulated 501.59 M in total debt with debt to equity ratio (D/E) of 0.37, which is about average as compared to similar companies. Eucatex SA Indstria has a current ratio of 1.3, suggesting that it is not liquid enough and may have problems paying out its financial obligations in time and when they become due. Debt can assist Eucatex SA until it has trouble settling it off, either with new capital or with free cash flow. So, Eucatex SA'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 Eucatex SA Indstria sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Eucatex to invest in growth at high rates of return. When we think about Eucatex SA's use of debt, we should always consider it together with cash and equity.Eucatex SA 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 Eucatex SA's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Eucatex SA, which in turn will lower the firm's financial flexibility.Eucatex SA Corporate Bonds Issued
Understaning Eucatex SA Use of Financial Leverage
Eucatex SA's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Eucatex SA's current equity. If creditors own a majority of Eucatex SA's assets, the company is considered highly leveraged. Understanding the composition and structure of Eucatex SA's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Indstria e Comrcio manufactures and markets ceiling and insulating materials in Brazil. Indstria e Comrcio was founded in 1951 and is headquartered in So Paulo, Brazil. EUCATEX PN operates under Building Products Equipment classification in Brazil and is traded on Sao Paolo Stock Exchange. Please read more on our technical analysis page.
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When running Eucatex SA's price analysis, check to measure Eucatex SA'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 Eucatex SA is operating at the current time. Most of Eucatex SA's value examination focuses on studying past and present price action to predict the probability of Eucatex SA's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Eucatex SA's price. Additionally, you may evaluate how the addition of Eucatex SA 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.