Light Wonder Debt
| LNW Stock | USD 85.42 1.12 1.29% |
Light Wonder has over 3.93 Billion in debt which may indicate that it relies heavily on debt financing. . Light Wonder's financial risk is the risk to Light Wonder stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Light Wonder'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. Light Wonder'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 Light Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Light Wonder's stakeholders.
For most companies, including Light Wonder, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Light Wonder, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Light Wonder's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 8.907 | Book Value 9.64 | Operating Margin 0.2387 | Profit Margin 0.0933 | Return On Assets 0.0858 |
Given that Light Wonder'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 Light Wonder 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 Light Wonder to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Light Wonder is said to be less leveraged. If creditors hold a majority of Light Wonder's assets, the Company is said to be highly leveraged.
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Light Wonder Debt to Cash Allocation
Many companies such as Light Wonder, 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.
Light Wonder has 3.93 B in debt with debt to equity (D/E) ratio of 4.1, demonstrating that the company may be unable to create cash to meet all of its financial commitments. Light Wonder has a current ratio of 1.36, which is typical for the industry and considered as normal. Note however, debt could still be an excellent tool for Light to invest in growth at high rates of return. Light Wonder 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 Light Wonder's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Light Wonder, which in turn will lower the firm's financial flexibility.Light Wonder Corporate Bonds Issued
Understaning Light Wonder Use of Financial Leverage
Understanding the structure of Light Wonder's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Light Wonder'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.
Light Wonder, Inc. develops technology-based products and services, and related content for the gaming, lottery, social and digital gaming industries in the United States and internationally. Light Wonder, Inc. was incorporated in 1984 and is based in Las Vegas, Nevada. Light Wonder operates under Gambling classification in the United States and is traded on NASDAQ Exchange. It employs 5600 people. Please read more on our technical analysis page.
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When running Light Wonder's price analysis, check to measure Light Wonder's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Light Wonder is operating at the current time. Most of Light Wonder's value examination focuses on studying past and present price action to predict the probability of Light Wonder's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Light Wonder's price. Additionally, you may evaluate how the addition of Light Wonder to your portfolios can decrease your overall portfolio volatility.
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.