Signify Health Debt
| SGFYDelisted Stock | USD 30.49 0.00 0.00% |
Signify Health holds a debt-to-equity ratio of 0.349. With a high degree of financial leverage come high-interest payments, which usually reduce Signify Health's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Signify 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. Signify 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 Signify Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Signify Health's stakeholders.
For most companies, including Signify Health, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Signify Health, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Signify Health'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 Signify Health'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 Signify Health 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 Signify Health to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Signify Health is said to be less leveraged. If creditors hold a majority of Signify Health's assets, the Company is said to be highly leveraged.
Signify |
Signify Health Debt to Cash Allocation
As Signify Health follows its natural business cycle, the capital allocation decisions will not magically go away. Signify Health's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors.
Signify Health currently holds 333.1 M in liabilities with Debt to Equity (D/E) ratio of 0.35, which is about average as compared to similar companies. Signify Health has a current ratio of 5.13, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Signify Health's use of debt, we should always consider it together with its cash and equity.Signify Health 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 Signify Health's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Signify Health, which in turn will lower the firm's financial flexibility.Signify Health Corporate Bonds Issued
Understaning Signify Health Use of Financial Leverage
Understanding the structure of Signify Health's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Signify Health's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its cost of debt.
Signify Health, Inc. operates a healthcare platform that utilizes analytics, technology, and healthcare provider networks in the United States. Signify Health, Inc. was founded in 2017 and is headquartered in Dallas, Texas. Signify Health operates under Health Information Services classification in the United States and is traded on New York Stock Exchange. It employs 2200 people. Please read more on our technical analysis page.
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Other Consideration for investing in Signify Stock
If you are still planning to invest in Signify Health check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Signify Health's history and understand the potential risks before investing.
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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.