Petro River Oil PETROBRAS Bond
Petro River Oil has over 0.0 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 Petro River's Earnings Per Share (EPS).
Petro |
Popular Name | Petro River PETROBRAS GLOBAL FIN |
Equity ISIN Code | US71647K3032 |
Bond Issue ISIN Code | US71647NAQ25 |
S&P Rating | Others |
Maturity Date | Others |
Issuance Date | Others |
Coupon | 8.75 % |
Petro River Oil Outstanding Bond Obligations
Understaning Petro River Use of Financial Leverage
Petro River's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Petro River's total debt position, including all outstanding debt obligations, and compares it with Petro River's equity. Financial leverage can amplify the potential profits to Petro River's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Petro River is unable to cover its debt costs.
Petro River Oil Corp., an independent energy company, focuses on the exploration and development of conventional oil and gas assets. It primarily holds interests in the Mid-Continent Region in Oklahoma, including Osage County and Kay County, Oklahoma. Petro River operates under Oil Gas EP classification in the United States and is traded on OTC Exchange. It employs 4 people. Please read more on our technical analysis page.
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Petro River financial ratios help investors to determine whether Petro Pink Sheet 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 Petro with respect to the benefits of owning Petro River 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.