HDFC Bank Limited 404119BU2 Bond
| HDFA Stock | EUR 63.00 1.00 1.56% |
HDFC Bank's financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. HDFC Bank's financial risk is the risk to HDFC Bank stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
HDFC |
Given the importance of HDFC Bank's capital structure, the first step in the capital decision process is for the management of HDFC Bank 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 HDFC Bank Limited to issue bonds at a reasonable cost.
| Popular Name | HDFC Bank HCA INC 45 |
| Equity ISIN Code | US40415F1012 |
| Bond Issue ISIN Code | US404119BU21 |
| S&P Rating | Others |
| Maturity Date | 15th of February 2027 |
| Issuance Date | 15th of August 2016 |
| Coupon | 4.5 % |
HDFC Bank Limited Outstanding Bond Obligations
Understaning HDFC Bank Use of Financial Leverage
HDFC Bank's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures HDFC Bank's total debt position, including all outstanding debt obligations, and compares it with HDFC Bank's equity. Financial leverage can amplify the potential profits to HDFC Bank's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if HDFC Bank is unable to cover its debt costs.
HDFC Bank Limited provides various banking and financial services to individuals and businesses in India, Bahrain, Hong Kong, and Dubai. HDFC Bank Limited was founded in 1994 and is based in Mumbai, India. HDFC Bank operates under Banks - Regional - Asia classification in Germany and is traded on Frankfurt Stock Exchange. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in HDFC Stock
When determining whether HDFC Bank Limited offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of HDFC Bank'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 Hdfc Bank Limited Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Hdfc Bank Limited Stock:Check out the analysis of HDFC Bank Fundamentals Over Time. You can also try the CEOs Directory module to screen CEOs from public companies around the world.
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.