Rekor Systems Corporate Bonds and Leverage Analysis
| REKR Stock | USD 1.01 0.03 2.88% |
Rekor Systems holds a debt-to-equity ratio of 0.344. . Rekor Systems' financial risk is the risk to Rekor Systems stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Rekor Systems' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Rekor Systems' 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 Rekor Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Rekor Systems' stakeholders.
For most companies, including Rekor Systems, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Rekor Systems, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Rekor Systems' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Rekor |
Given the importance of Rekor Systems' capital structure, the first step in the capital decision process is for the management of Rekor Systems to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Rekor Systems to issue bonds at a reasonable cost.
Rekor Systems Debt to Cash Allocation
Many companies such as Rekor Systems, 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.
Rekor Systems currently holds 42.33 M in liabilities with Debt to Equity (D/E) ratio of 0.34, which is about average as compared to similar companies. Rekor Systems has a current ratio of 0.92, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Note, when we think about Rekor Systems' use of debt, we should always consider it together with its cash and equity.Rekor Systems 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 Rekor Systems' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Rekor Systems, which in turn will lower the firm's financial flexibility.Rekor Systems Corporate Bonds Issued
Understaning Rekor Systems Use of Financial Leverage
Rekor Systems' financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Rekor Systems' current equity. If creditors own a majority of Rekor Systems' assets, the company is considered highly leveraged. Understanding the composition and structure of Rekor Systems' outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Rekor Systems, Inc., through its subsidiaries, develops and implements transformative mission-critical intelligent infrastructure solutions and services for transportation management, public safety, and commercial markets in the United States, Canada, and internationally. Rekor Systems, Inc. was founded in 2017 and is headquartered in Columbia, Maryland. Rekor Systems operates under SoftwareInfrastructure classification in the United States and is traded on NASDAQ Exchange. It employs 249 people. Please read more on our technical analysis page.
Additional Tools for Rekor Stock Analysis
When running Rekor Systems' price analysis, check to measure Rekor Systems' 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 Rekor Systems is operating at the current time. Most of Rekor Systems' value examination focuses on studying past and present price action to predict the probability of Rekor Systems' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Rekor Systems' price. Additionally, you may evaluate how the addition of Rekor Systems 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.