Titan Machinery Debt
| 3TY Stock | EUR 14.80 0.40 2.63% |
Titan Machinery has over 74.77 Million in debt which may indicate that it relies heavily on debt financing. . Titan Machinery's financial risk is the risk to Titan Machinery stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Titan Machinery'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. Titan Machinery'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 Titan Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Titan Machinery's stakeholders.
For most companies, including Titan Machinery, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Titan Machinery, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Titan Machinery'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 Titan Machinery'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 Titan Machinery 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 Titan Machinery to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Titan Machinery is said to be less leveraged. If creditors hold a majority of Titan Machinery's assets, the Company is said to be highly leveraged.
Titan |
Titan Machinery Debt to Cash Allocation
Many companies such as Titan Machinery, 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.
Titan Machinery has accumulated 74.77 M in total debt with debt to equity ratio (D/E) of 170.4, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Titan Machinery has a current ratio of 1.36, which is within standard range for the sector. Debt can assist Titan Machinery until it has trouble settling it off, either with new capital or with free cash flow. So, Titan Machinery'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 Titan Machinery sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Titan to invest in growth at high rates of return. When we think about Titan Machinery's use of debt, we should always consider it together with cash and equity.Titan Machinery 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 Titan Machinery's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Titan Machinery, which in turn will lower the firm's financial flexibility.Titan Machinery Corporate Bonds Issued
Most Titan bonds can be classified according to their maturity, which is the date when Titan Machinery 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 Titan Machinery Use of Financial Leverage
Titan Machinery's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Titan Machinery's total debt position, including all outstanding debt obligations, and compares it with Titan Machinery's equity. Financial leverage can amplify the potential profits to Titan Machinery's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Titan Machinery is unable to cover its debt costs.
Titan Machinery Inc. owns and operates a network of full-service agricultural and construction equipment stores. Titan Machinery Inc. was founded in 1980 and is headquartered in West Fargo, North Dakota. TITAN MACHINERY operates under Industrial Distribution classification in Germany and is traded on Frankfurt Stock Exchange. It employs 1550 people. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in Titan Stock
When determining whether Titan Machinery offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Titan Machinery'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 Titan Machinery Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Titan Machinery Stock:Check out the analysis of Titan Machinery Fundamentals Over Time. For more detail on how to invest in Titan Stock please use our How to Invest in Titan Machinery guide.You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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.