GMO Internet Current Debt
| GMOYF Stock | USD 17.75 1.36 8.30% |
GMO Internet holds a debt-to-equity ratio of 1.811. . GMO Internet's financial risk is the risk to GMO Internet stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
GMO Internet'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. GMO Internet'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 GMO Pink Sheet's retail investors understand whether an upcoming fall or rise in the market will negatively affect GMO Internet's stakeholders.
For most companies, including GMO Internet, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for GMO Internet, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, GMO Internet'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 GMO Internet'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 GMO Internet 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 GMO Internet to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, GMO Internet is said to be less leveraged. If creditors hold a majority of GMO Internet's assets, the Company is said to be highly leveraged.
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GMO Internet Debt to Cash Allocation
Many companies such as GMO Internet, 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.
GMO Internet has accumulated 121.67 B in total debt with debt to equity ratio (D/E) of 1.81, which is about average as compared to similar companies. GMO Internet has a current ratio of 1.14, 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 GMO Internet until it has trouble settling it off, either with new capital or with free cash flow. So, GMO Internet'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 GMO Internet sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for GMO to invest in growth at high rates of return. When we think about GMO Internet's use of debt, we should always consider it together with cash and equity.GMO Internet 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 GMO Internet's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of GMO Internet, which in turn will lower the firm's financial flexibility.Understaning GMO Internet Use of Financial Leverage
GMO Internet's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures GMO Internet's total debt position, including all outstanding debt obligations, and compares it with GMO Internet's equity. Financial leverage can amplify the potential profits to GMO Internet's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if GMO Internet is unable to cover its debt costs.
GMO internet group, Inc. provides various Internet services worldwide. The company was incorporated in 1976 and is headquartered in Tokyo, Japan. GMO Internet operates under Telecom Services classification in the United States and is traded on OTC Exchange. It employs 5758 people. Please read more on our technical analysis page.
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Other Information on Investing in GMO Pink Sheet
GMO Internet financial ratios help investors to determine whether GMO Pink Sheet is cheap or expensive when compared to a particular measure, such as profits or enterprise value. In other words, they help investors to determine the cost of investment in GMO with respect to the benefits of owning GMO Internet security.
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.