Silly Monks Entertainment Corporate Bonds and Leverage Analysis

SILLYMONKS   21.71  0.31  1.41%   
At this time, Silly Monks' Short and Long Term Debt Total is very stable compared to the past year. Short Term Debt is expected to grow at the current pace this year, while Net Debt is likely to drop (14.9 M). With a high degree of financial leverage come high-interest payments, which usually reduce Silly Monks' Earnings Per Share (EPS).
At this time, Silly Monks' Total Current Liabilities is very stable compared to the past year. As of the 11th of December 2024, Liabilities And Stockholders Equity is likely to grow to about 143.2 M, while Non Current Liabilities Total is likely to drop about 6.2 M.
  
Check out the analysis of Silly Monks Fundamentals Over Time.
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Given the importance of Silly Monks' capital structure, the first step in the capital decision process is for the management of Silly Monks 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 Silly Monks Entertainment to issue bonds at a reasonable cost.

Silly Monks Entertainment Debt to Cash Allocation

Silly Monks Entertainment has accumulated 5.5 M in total debt. Debt can assist Silly Monks until it has trouble settling it off, either with new capital or with free cash flow. So, Silly Monks' 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 Silly Monks Entertainment sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Silly to invest in growth at high rates of return. When we think about Silly Monks' use of debt, we should always consider it together with cash and equity.

Silly Monks Total Assets Over Time

Silly Monks 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 Silly Monks' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Silly Monks, which in turn will lower the firm's financial flexibility.

Silly Monks Corporate Bonds Issued

Silly Short Long Term Debt Total

Short Long Term Debt Total

8.93 Million

At this time, Silly Monks' Short and Long Term Debt Total is very stable compared to the past year.

Understaning Silly Monks Use of Financial Leverage

Leverage ratios show Silly Monks' total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Silly Monks' financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
Last ReportedProjected for Next Year
Short and Long Term Debt Total6.3 M8.9 M
Net Debt-14.2 M-14.9 M
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Other Information on Investing in Silly Stock

Silly Monks financial ratios help investors to determine whether Silly 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 Silly with respect to the benefits of owning Silly Monks 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.