Ecoplastic Debt
| 038110 Stock | KRW 2,545 75.00 3.04% |
Ecoplastic holds a debt-to-equity ratio of 1.936. With a high degree of financial leverage come high-interest payments, which usually reduce Ecoplastic's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Ecoplastic'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. Ecoplastic'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 Ecoplastic Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Ecoplastic's stakeholders.
For most companies, including Ecoplastic, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Ecoplastic, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Ecoplastic'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 Ecoplastic'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 Ecoplastic 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 Ecoplastic to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Ecoplastic is said to be less leveraged. If creditors hold a majority of Ecoplastic's assets, the Company is said to be highly leveraged.
Ecoplastic |
Ecoplastic Debt to Cash Allocation
Ecoplastic has accumulated 37.59 B in total debt with debt to equity ratio (D/E) of 1.94, which is about average as compared to similar companies. Ecoplastic has a current ratio of 0.56, 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 Ecoplastic until it has trouble settling it off, either with new capital or with free cash flow. So, Ecoplastic'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 Ecoplastic sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Ecoplastic to invest in growth at high rates of return. When we think about Ecoplastic's use of debt, we should always consider it together with cash and equity.Ecoplastic 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 Ecoplastic's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Ecoplastic, which in turn will lower the firm's financial flexibility.Ecoplastic Corporate Bonds Issued
Most Ecoplastic bonds can be classified according to their maturity, which is the date when Ecoplastic has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Understaning Ecoplastic Use of Financial Leverage
Ecoplastic's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Ecoplastic's total debt position, including all outstanding debt obligations, and compares it with Ecoplastic's equity. Financial leverage can amplify the potential profits to Ecoplastic's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Ecoplastic is unable to cover its debt costs.
Ecoplastic Corporation engages in the research, development, production, and sale of auto plastic parts in South Korea. The company was founded in 1984 and is based in Gyeongju, South Korea. ECOPLASTIC is traded on Korean Securities Dealers Automated Quotations in South Korea. Please read more on our technical analysis page.
Pair Trading with Ecoplastic
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Ecoplastic position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ecoplastic will appreciate offsetting losses from the drop in the long position's value.Moving together with Ecoplastic Stock
Moving against Ecoplastic Stock
The ability to find closely correlated positions to Ecoplastic could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Ecoplastic when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Ecoplastic - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Ecoplastic to buy it.
The correlation of Ecoplastic is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Ecoplastic moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Ecoplastic moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Ecoplastic can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Other Information on Investing in Ecoplastic Stock
Ecoplastic financial ratios help investors to determine whether Ecoplastic 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 Ecoplastic with respect to the benefits of owning Ecoplastic 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.