Sumitomo Electric SUMITR Bond

SMTOY Stock  USD 18.61  0.16  0.85%   
Sumitomo Electric holds a debt-to-equity ratio of 0.427. With a high degree of financial leverage come high-interest payments, which usually reduce Sumitomo Electric's Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

Sumitomo Electric'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. Sumitomo Electric'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 Sumitomo Pink Sheet's retail investors understand whether an upcoming fall or rise in the market will negatively affect Sumitomo Electric's stakeholders.
For most companies, including Sumitomo Electric, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Sumitomo Electric Industries, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Sumitomo Electric'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 Sumitomo Electric Fundamentals Over Time.
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Given the importance of Sumitomo Electric's capital structure, the first step in the capital decision process is for the management of Sumitomo Electric 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 Sumitomo Electric Industries to issue bonds at a reasonable cost.
Popular NameSumitomo Electric SUMITR 105 12 SEP 25
Equity ISIN CodeUS8656172033
Bond Issue ISIN CodeUS86563VAT61
S&P Rating
Others
Maturity DateOthers
Issuance DateOthers
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Sumitomo Electric Outstanding Bond Obligations

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SUMITR 135 16 SEP 26US86563VAY56Details
SUMITR 105 12 SEP 25US86563VAT61Details
SUMITR 48 15 SEP 25US86563VBC28Details
SUMITR 255 10 MAR 25US86563VAZ22Details
SUMITR 5722056 09 MAR 26US86563VBF58Details
SUMITR 565 09 MAR 26US86563VBG32Details
SUMILF 3375 15 APR 81US86564CAC47Details
MPLX LP 4875US55336VAG59Details
MPLX LP 4125US55336VAK61Details
MPLX LP 52US55336VAL45Details
Sumitomo Mitsui FGUS86562MAC47Details
SUMITOMO MITSUI FINLUS86562MAF77Details
SUMITOMO MITSUI FINLUS86562MAK62Details
Morgan Stanley 3591US61744YAK47Details
SUMITOMO MITSUI FINLUS86562MAN02Details
SUMITOMO MITSUI FINLUS86562MAR16Details
Morgan Stanley 3971US61744YAL20Details
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SUMITOMO MITSUI FINANCIALUS86562MBZ23Details
SUMIBK 171 12 JAN 31US86562MCE84Details
SUMITOMO MITSUI FINANCIALUS86562MCD02Details
SUMITOMO MITSUI FINANCIALUS86562MCB46Details
SUMITOMO MITSUI FINANCIALUS86562MCA62Details
SUMIBK 1402 17 SEP 26US86562MCH16Details
SUMIBK 1902 17 SEP 28US86562MCG33Details
SUMIBK 2296 12 JAN 41US86562MCF59Details
SUMIBK 2174 14 JAN 27US86562MCM01Details
SUMIBK 5386826 14 JAN 27US86562MCL28Details
SUMIBK 293 17 SEP 41US86562MCK45Details
SUMIBK 2222 17 SEP 31US86562MCJ71Details
SUMIBK 305 14 JAN 42US86562MCQ15Details
SUMIBK 2472 14 JAN 29US86562MCN83Details
SUMIBK 59308 13 JAN 26US86562MCU27Details
SUMIBK 5464 13 JAN 26US86562MCT53Details
SUMIBK 5766 13 JAN 33US86562MCS70Details
SUMIBK 552 13 JAN 28US86562MCR97Details
SUMIBK 571 13 JAN 30US86562MCW82Details
SUMITOMO MITSUI FINLUS86562MAV28Details
US865632AA18US865632AA18Details
SUMITOMO MITSUI FINLUS86562MAY66Details
SUMITOMO MITSUI FINANCIALUS86562MBC38Details
SUMITOMO MITSUI FINLUS86562MBG42Details
SUMITOMO MITSUI FINANCIALUS86562MBP41Details
SUMITOMO MITSUI FINANCIALUS86562MBW91Details
SUMITOMO MITSUI FINANCIALUS86562MBV19Details
SUMIBK 2724 27 SEP 29US86562MBU36Details

Understaning Sumitomo Electric Use of Financial Leverage

Understanding the structure of Sumitomo Electric's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Sumitomo Electric'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.
Sumitomo Electric Industries, Ltd. manufactures and sells electric wires and cables worldwide. The company was founded in 1897 and is headquartered in Osaka, Japan. Sumitomo Electric operates under Auto Parts classification in the United States and is traded on OTC Exchange. It employs 281075 people.
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Additional Tools for Sumitomo Pink Sheet Analysis

When running Sumitomo Electric's price analysis, check to measure Sumitomo Electric's 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 Sumitomo Electric is operating at the current time. Most of Sumitomo Electric's value examination focuses on studying past and present price action to predict the probability of Sumitomo Electric's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Sumitomo Electric's price. Additionally, you may evaluate how the addition of Sumitomo Electric 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.
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.