Metsa Board Debt
| METSA Stock | EUR 6.10 0.14 2.24% |
Metsa Board Oyj has over 427.2 Million in debt which may indicate that it relies heavily on debt financing. With a high degree of financial leverage come high-interest payments, which usually reduce Metsa Board's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Metsa Board'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. Metsa Board'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 Metsa Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Metsa Board's stakeholders.
For most companies, including Metsa Board, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Metsa Board Oyj, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Metsa Board'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 Metsa Board'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 Metsa Board 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 Metsa Board to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Metsa Board is said to be less leveraged. If creditors hold a majority of Metsa Board's assets, the Company is said to be highly leveraged.
Metsa |
Metsa Board Oyj Debt to Cash Allocation
Metsa Board Oyj has accumulated 427.2 M in total debt with debt to equity ratio (D/E) of 31.1, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Metsa Board Oyj has a current ratio of 1.4, which is within standard range for the sector. Debt can assist Metsa Board until it has trouble settling it off, either with new capital or with free cash flow. So, Metsa Board'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 Metsa Board Oyj sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Metsa to invest in growth at high rates of return. When we think about Metsa Board's use of debt, we should always consider it together with cash and equity.Metsa Board 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 Metsa Board's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Metsa Board, which in turn will lower the firm's financial flexibility.Metsa Board Corporate Bonds Issued
Most Metsa bonds can be classified according to their maturity, which is the date when Metsa Board Oyj 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 Metsa Board Use of Financial Leverage
Understanding the composition and structure of Metsa Board's debt gives an idea of how risky is the capital structure of the business and if it is worth investing in it. The degree of Metsa Board's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Mets Board Oyj produces folding boxboard, food service boards and white kraftliners worldwide. The company was formerly known as M-real Corporation and changed its name to Mets Board Oyj in March 2012. Mets Board is traded on Helsinki Exchange in Finland. 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 Metsa Stock
Metsa Board financial ratios help investors to determine whether Metsa 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 Metsa with respect to the benefits of owning Metsa Board 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.