Core Bond Debt
| JICDX Fund | USD 10.76 0.12 1.10% |
Core Bond'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. Core Bond's financial risk is the risk to Core Bond 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).
Given that Core Bond's debt-to-equity ratio measures a Mutual Fund's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Core Bond 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 Core Bond to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Core Bond is said to be less leveraged. If creditors hold a majority of Core Bond's assets, the Mutual Fund is said to be highly leveraged.
Core |
Core Bond 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 Core Bond's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Core Bond, which in turn will lower the firm's financial flexibility.Core Bond Corporate Bonds Issued
Understaning Core Bond Use of Financial Leverage
Understanding the structure of Core Bond's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Core Bond's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its cost of debt.
The fund invests at least 80 percent of its net assets in a broad range of investment-grade debt securities. The manager expects to maintain an effective duration within 10 percent of the duration of the Bloomberg U.S. Aggregate Bond Index. It may invest up to 25 percent of total assets in asset-backed securities, other than mortgage-backed securities up to 20 percent of total assets in U.S. dollar-denominated obligations of foreign issuers and up to 10 percent of total assets in stripped mortgage-backed securities. Please read more on our technical analysis page.
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Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.Other Information on Investing in Core Mutual Fund
Core Bond financial ratios help investors to determine whether Core Mutual Fund 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 Core with respect to the benefits of owning Core Bond security.
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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.