Bank of Suzhou 404280DR7 Bond
| 002966 Stock | 7.63 0.21 2.68% |
At present, Bank of Suzhou's Net Debt is projected to increase significantly based on the last few years of reporting. The current year's Short and Long Term Debt Total is expected to grow to about 190.9 B, whereas Short Term Debt is forecasted to decline to about 121.8 B. With a high degree of financial leverage come high-interest payments, which usually reduce Bank of Suzhou's Earnings Per Share (EPS).
At present, Bank of Suzhou's Total Current Liabilities is projected to increase significantly based on the last few years of reporting. The current year's Liabilities And Stockholders Equity is expected to grow to about 632.5 B, whereas Change To Liabilities is forecasted to decline to (378.9 M). Bank |
Given the importance of Bank of Suzhou's capital structure, the first step in the capital decision process is for the management of Bank of Suzhou 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 Bank of Suzhou to issue bonds at a reasonable cost.
| Popular Name | Bank of Suzhou HSBC Holdings PLC |
| Specialization | Banks - Regional |
| Equity ISIN Code | CNE100003LQ2 |
| Bond Issue ISIN Code | US404280DR76 |
Bank of Suzhou Outstanding Bond Obligations
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Understaning Bank of Suzhou Use of Financial Leverage
Bank of Suzhou's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Bank of Suzhou's total debt position, including all outstanding debt obligations, and compares it with Bank of Suzhou's equity. Financial leverage can amplify the potential profits to Bank of Suzhou's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Bank of Suzhou is unable to cover its debt costs.
| Last Reported | Projected for Next Year | ||
| Net Debt | 117.7 B | 123.5 B | |
| Short and Long Term Debt Total | 181.9 B | 190.9 B | |
| Short Term Debt | 155 B | 121.8 B |
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Bank of Suzhou financial ratios help investors to determine whether Bank 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 Bank with respect to the benefits of owning Bank of Suzhou 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.