Philip Morris Intern 404280DR7 Bond
| 4I1 Stock | EUR 125.78 0.64 0.51% |
Philip Morris' financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Philip Morris' financial risk is the risk to Philip Morris stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
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Given the importance of Philip Morris' capital structure, the first step in the capital decision process is for the management of Philip Morris 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 Philip Morris International to issue bonds at a reasonable cost.
| Popular Name | Philip Morris HSBC Holdings PLC |
| Equity ISIN Code | US7181721090 |
| Bond Issue ISIN Code | US404280DR76 |
| S&P Rating | Others |
| Maturity Date | 3rd of November 2028 |
| Issuance Date | 3rd of November 2022 |
| Coupon | 7.39 % |
Philip Morris Intern Outstanding Bond Obligations
Understaning Philip Morris Use of Financial Leverage
Philip Morris' financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Philip Morris' total debt position, including all outstanding debt obligations, and compares it with Philip Morris' equity. Financial leverage can amplify the potential profits to Philip Morris' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Philip Morris is unable to cover its debt costs.
Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes, other nicotine-containing products, and smoke-free products and related electronic devices and accessories. The company was incorporated in 1987 and is headquartered in New York, New York. PHILIP MORRIS operates under Tobacco classification in Germany and is traded on Frankfurt Stock Exchange. It employs 77400 people. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in Philip Stock
When determining whether Philip Morris Intern is a strong investment it is important to analyze Philip Morris' competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Philip Morris' future performance. For an informed investment choice regarding Philip Stock, refer to the following important reports:Check out the analysis of Philip Morris Fundamentals Over Time. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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.