Gladstone Investment Debt
1G3 Stock | EUR 12.70 0.28 2.16% |
Gladstone Investment has over 248.21 Million in debt which may indicate that it relies heavily on debt financing. . Gladstone Investment's financial risk is the risk to Gladstone Investment stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Gladstone Investment'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. Gladstone Investment'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 Gladstone Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Gladstone Investment's stakeholders.
For most companies, including Gladstone Investment, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Gladstone Investment, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Gladstone Investment'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 Gladstone Investment'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 Gladstone Investment 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 Gladstone Investment to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Gladstone Investment is said to be less leveraged. If creditors hold a majority of Gladstone Investment's assets, the Company is said to be highly leveraged.
Gladstone |
Gladstone Investment Debt to Cash Allocation
Many companies such as Gladstone Investment, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
Gladstone Investment has accumulated 248.21 M in total debt with debt to equity ratio (D/E) of 70.0, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Gladstone Investment has a current ratio of 1.28, suggesting that it is in a questionable position to pay out its financial obligations in time and when they become due. Debt can assist Gladstone Investment until it has trouble settling it off, either with new capital or with free cash flow. So, Gladstone Investment'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 Gladstone Investment sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Gladstone to invest in growth at high rates of return. When we think about Gladstone Investment's use of debt, we should always consider it together with cash and equity.Gladstone Investment 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 Gladstone Investment's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Gladstone Investment, which in turn will lower the firm's financial flexibility.Gladstone Investment Corporate Bonds Issued
Most Gladstone bonds can be classified according to their maturity, which is the date when Gladstone Investment 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 Gladstone Investment Use of Financial Leverage
Gladstone Investment's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Gladstone Investment's total debt position, including all outstanding debt obligations, and compares it with Gladstone Investment's equity. Financial leverage can amplify the potential profits to Gladstone Investment's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Gladstone Investment is unable to cover its debt costs.
Gladstone Investment Corporation is a business development company specializing in buyouts recapitalizations refinancing existing debt senior debt securities such as senior loans, senior term loans, lines of credit, and senior notes senior subordinated debt securities such as senior subordinated loans and senior subordinated notes junior subordinated debt securities such as subordinated notes and mezzanine loans limited liability company interests, and warrants or options. The fund typically holds its investments for seven years and exits via sale or recapitalization, initial public offering, or sale to third party. Gladstone Investment operates under Asset Management classification in Germany and traded on Frankfurt Stock Exchange. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in Gladstone Stock
When determining whether Gladstone Investment offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Gladstone Investment's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Gladstone Investment Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Gladstone Investment Stock:Check out the analysis of Gladstone Investment Fundamentals Over Time. For more detail on how to invest in Gladstone Stock please use our How to Invest in Gladstone Investment guide.You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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.