Siam City Current Debt
SCCC-R Stock | THB 161.50 15.00 10.24% |
Siam City Cement has over 31.54 Billion 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 Siam City's Earnings Per Share (EPS).
Given that Siam City'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 Siam City 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 Siam City to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Siam City is said to be less leveraged. If creditors hold a majority of Siam City's assets, the Company is said to be highly leveraged.
Siam |
Siam City Cement Debt to Cash Allocation
Siam City Cement has accumulated 31.54 B in total debt with debt to equity ratio (D/E) of 92.7, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Siam City Cement has a current ratio of 0.98, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist Siam City until it has trouble settling it off, either with new capital or with free cash flow. So, Siam City'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 Siam City Cement sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Siam to invest in growth at high rates of return. When we think about Siam City's use of debt, we should always consider it together with cash and equity.Siam City 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 Siam City's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Siam City, which in turn will lower the firm's financial flexibility.Understaning Siam City Use of Financial Leverage
Siam City's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Siam City's total debt position, including all outstanding debt obligations, and compares it with Siam City's equity. Financial leverage can amplify the potential profits to Siam City's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Siam City is unable to cover its debt costs.
Siam City Cement Public Company Limited, together with its subsidiaries, manufactures and sells cement products primarily in Thailand. Siam City Cement Public Company Limited was founded in 1969 and is headquartered in Bangkok, Thailand. SIAM CITY operates under Building Materials classification in Thailand and is traded on Stock Exchange of Thailand. Please read more on our technical analysis page.
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Siam City financial ratios help investors to determine whether Siam 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 Siam with respect to the benefits of owning Siam City 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.