H2O Retailing Debt
| HKU Stock | EUR 14.10 0.10 0.71% |
H2O Retailing has over 174.28 Billion in debt which may indicate that it relies heavily on debt financing. . H2O Retailing's financial risk is the risk to H2O Retailing stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
H2O Retailing'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. H2O Retailing'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 H2O Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect H2O Retailing's stakeholders.
For most companies, including H2O Retailing, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for H2O Retailing, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, H2O Retailing'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 H2O Retailing'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 H2O Retailing 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 H2O Retailing to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, H2O Retailing is said to be less leveraged. If creditors hold a majority of H2O Retailing's assets, the Company is said to be highly leveraged.
H2O |
H2O Retailing Debt to Cash Allocation
Many companies such as H2O Retailing, 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.
H2O Retailing has accumulated 174.28 B in total debt with debt to equity ratio (D/E) of 63.3, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. H2O Retailing has a current ratio of 0.79, 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 H2O Retailing until it has trouble settling it off, either with new capital or with free cash flow. So, H2O Retailing'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 H2O Retailing sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for H2O to invest in growth at high rates of return. When we think about H2O Retailing's use of debt, we should always consider it together with cash and equity.H2O Retailing 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 H2O Retailing's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of H2O Retailing, which in turn will lower the firm's financial flexibility.H2O Retailing Corporate Bonds Issued
Most H2O bonds can be classified according to their maturity, which is the date when H2O Retailing has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Understaning H2O Retailing Use of Financial Leverage
H2O Retailing's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures H2O Retailing's total debt position, including all outstanding debt obligations, and compares it with H2O Retailing's equity. Financial leverage can amplify the potential profits to H2O Retailing's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if H2O Retailing is unable to cover its debt costs.
H2O Retailing Corporation operates department stores, supermarkets, and shopping centers in Japan. The company was founded in 1929 and is based in Osaka, Japan. H2O RETAILING is traded on Frankfurt Stock Exchange in Germany. Please read more on our technical analysis page.
Currently Active Assets on Macroaxis
Other Information on Investing in H2O Stock
H2O Retailing financial ratios help investors to determine whether H2O Stock 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 H2O with respect to the benefits of owning H2O Retailing 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.