Feng Hsin Debt
2015 Stock | TWD 77.90 0.80 1.04% |
Feng Hsin Steel holds a debt-to-equity ratio of 2.8. . Feng Hsin's financial risk is the risk to Feng Hsin stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Feng Hsin'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. Feng Hsin'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 Feng Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Feng Hsin's stakeholders.
For most companies, including Feng Hsin, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Feng Hsin Steel, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Feng Hsin'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 Feng Hsin'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 Feng Hsin 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 Feng Hsin to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Feng Hsin is said to be less leveraged. If creditors hold a majority of Feng Hsin's assets, the Company is said to be highly leveraged.
Feng |
Feng Hsin Steel Debt to Cash Allocation
Many companies such as Feng Hsin, 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.
Feng Hsin Steel has accumulated 490.87 M in total debt with debt to equity ratio (D/E) of 2.8, implying the company greatly relies on financing operations through barrowing. Feng Hsin Steel has a current ratio of 1.99, which is within standard range for the sector. Debt can assist Feng Hsin until it has trouble settling it off, either with new capital or with free cash flow. So, Feng Hsin'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 Feng Hsin Steel sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Feng to invest in growth at high rates of return. When we think about Feng Hsin's use of debt, we should always consider it together with cash and equity.Feng Hsin 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 Feng Hsin's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Feng Hsin, which in turn will lower the firm's financial flexibility.Feng Hsin Corporate Bonds Issued
Understaning Feng Hsin Use of Financial Leverage
Understanding the structure of Feng Hsin's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Feng Hsin'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.
FENG HSIN STEEL Co., Ltd. operates in the blast furnaces and steel mills sector in Taiwan. The company was founded in 1969 and is headquartered in Taichung, Taiwan. FENG HSIN operates under Steel classification in Taiwan and is traded on Taiwan Stock Exchange. It employs 869 people. Please read more on our technical analysis page.
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Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.Additional Tools for Feng Stock Analysis
When running Feng Hsin's price analysis, check to measure Feng Hsin'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 Feng Hsin is operating at the current time. Most of Feng Hsin's value examination focuses on studying past and present price action to predict the probability of Feng Hsin's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Feng Hsin's price. Additionally, you may evaluate how the addition of Feng Hsin 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.