Sabra Health Care 78574MAA1 Bond

SBC Stock  EUR 15.59  0.11  0.71%   
Sabra Health Care has over 2.31 Billion in debt which may indicate that it relies heavily on debt financing. . Sabra Health's financial risk is the risk to Sabra Health stockholders that is caused by an increase in debt.

Asset vs Debt

Equity vs Debt

Sabra Health'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. Sabra Health'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 Sabra Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Sabra Health's stakeholders.
For most companies, including Sabra Health, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Sabra Health Care, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Sabra Health's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
  
Check out the analysis of Sabra Health Fundamentals Over Time.
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Given the importance of Sabra Health's capital structure, the first step in the capital decision process is for the management of Sabra Health 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 Sabra Health Care to issue bonds at a reasonable cost.
Popular NameSabra Health SBRA 32 01 DEC 31
Equity ISIN CodeUS78573L1061
Bond Issue ISIN CodeUS78574MAA18
S&P Rating
Others
Maturity DateOthers
Issuance DateOthers
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Sabra Health Care Outstanding Bond Obligations

Understaning Sabra Health Use of Financial Leverage

Sabra Health's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Sabra Health's total debt position, including all outstanding debt obligations, and compares it with Sabra Health's equity. Financial leverage can amplify the potential profits to Sabra Health's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Sabra Health is unable to cover its debt costs.
As of March 31, 2019, Sabras investment portfolio included 437 real estate properties held for investment 304 Skilled NursingTransitional Care facilities, 88 Senior Housing communities , 23 Senior Housing communities operated by third-party property managers pursuant to property management agreements and 22 Specialty Hospitals and Other facilities, 30 assets held for sale, one investment in a direct financing lease, 20 investments in loans receivable one mortgage loan, two construction loans and 17 other loans, nine preferred equity investments and one investment in an unconsolidated joint venture that owns 172 Senior Housing Managed communities. As of March 31, 2019, Sabras real estate properties held for investment included 43,884 bedsunits and its unconsolidated joint venture included 7,652 bedsunits, spread across the United States and Canada
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Other Information on Investing in Sabra Stock

Sabra Health financial ratios help investors to determine whether Sabra 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 Sabra with respect to the benefits of owning Sabra Health 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.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.