Graphex Group Current Debt
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Graphex Group Limited holds a debt-to-equity ratio of 1.152. . Graphex Group's financial risk is the risk to Graphex Group stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Graphex Group'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. Graphex Group'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 Graphex Pink Sheet's retail investors understand whether an upcoming fall or rise in the market will negatively affect Graphex Group's stakeholders.
For most companies, including Graphex Group, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Graphex Group Limited, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Graphex Group'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 Graphex Group'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 Graphex Group 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 Graphex Group to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Graphex Group is said to be less leveraged. If creditors hold a majority of Graphex Group's assets, the Company is said to be highly leveraged.
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Graphex Group Limited Debt to Cash Allocation
Many companies such as Graphex Group, 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.
Graphex Group Limited has accumulated 299.88 M in total debt with debt to equity ratio (D/E) of 1.15, which is about average as compared to similar companies. Graphex Group Limited has a current ratio of 0.8, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist Graphex Group until it has trouble settling it off, either with new capital or with free cash flow. So, Graphex Group'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 Graphex Group Limited sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Graphex to invest in growth at high rates of return. When we think about Graphex Group's use of debt, we should always consider it together with cash and equity.
Graphex Group 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 Graphex Group's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Graphex Group, which in turn will lower the firm's financial flexibility.Understaning Graphex Group Use of Financial Leverage
Graphex Group's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Graphex Group's total debt position, including all outstanding debt obligations, and compares it with Graphex Group's equity. Financial leverage can amplify the potential profits to Graphex Group's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Graphex Group is unable to cover its debt costs.
Graphex Group Limited engages in the development, manufacturing, and marketing of graphene products in the Peoples Republic of China. Graphex Group Limited was founded in 1981 and is headquartered in Causeway Bay, Hong Kong. Graphex is traded on OTC Exchange in the United States. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in Graphex Pink Sheet
When determining whether Graphex Group Limited offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Graphex Group's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Graphex Group Limited Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Graphex Group Limited Stock:Check out the analysis of Graphex Group Fundamentals Over Time. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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.