Chailease Holding Corporate Bonds and Leverage Analysis
| 5871 Stock | TWD 118.50 2.50 2.07% |
Chailease Holding has over 158.34 Billion in debt which may indicate that it relies heavily on debt financing. . Chailease Holding's financial risk is the risk to Chailease Holding stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Chailease Holding'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. Chailease Holding'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 Chailease Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Chailease Holding's stakeholders.
For most companies, including Chailease Holding, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Chailease Holding Co, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Chailease Holding's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Chailease |
Given the importance of Chailease Holding's capital structure, the first step in the capital decision process is for the management of Chailease Holding 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 Chailease Holding Co to issue bonds at a reasonable cost.
Chailease Holding Debt to Cash Allocation
Many companies such as Chailease Holding, 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.
Chailease Holding Co has accumulated 158.34 B in total debt with debt to equity ratio (D/E) of 465.3, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Chailease Holding 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 Chailease Holding until it has trouble settling it off, either with new capital or with free cash flow. So, Chailease Holding'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 Chailease Holding sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Chailease to invest in growth at high rates of return. When we think about Chailease Holding's use of debt, we should always consider it together with cash and equity.Chailease Holding 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 Chailease Holding's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Chailease Holding, which in turn will lower the firm's financial flexibility.Chailease Holding Corporate Bonds Issued
Understaning Chailease Holding Use of Financial Leverage
Understanding the structure of Chailease Holding's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Chailease Holding'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.
Chailease Holding Company Limited, an investment holding company, provides various leasing and financing services in Taiwan, China, ASEAN countries, and internationally. Chailease Holding Company Limited was founded in 1977 and is based in Taipei, Taiwan. CHAILEASE HOLDING operates under Financial Services classification in Taiwan and is traded on Taiwan Stock Exchange. Please read more on our technical analysis page.
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When running Chailease Holding's price analysis, check to measure Chailease Holding'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 Chailease Holding is operating at the current time. Most of Chailease Holding's value examination focuses on studying past and present price action to predict the probability of Chailease Holding's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Chailease Holding's price. Additionally, you may evaluate how the addition of Chailease Holding 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.