American Aires Current Debt
| AAIRF Stock | USD 0.13 0.01 7.14% |
American Aires holds a debt-to-equity ratio of 0.46. . American Aires' financial risk is the risk to American Aires stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
American Aires' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. American Aires' 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 American Pink Sheet's retail investors understand whether an upcoming fall or rise in the market will negatively affect American Aires' stakeholders.
For most companies, including American Aires, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for American Aires, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, American Aires' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that American Aires' 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 American Aires 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 American Aires to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, American Aires is said to be less leveraged. If creditors hold a majority of American Aires' assets, the Company is said to be highly leveraged.
American |
American Aires Debt to Cash Allocation
Many companies such as American Aires, 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.
American Aires has accumulated 777.23 K in total debt with debt to equity ratio (D/E) of 0.46, which is about average as compared to similar companies. American Aires has a current ratio of 1.93, which is within standard range for the sector. Debt can assist American Aires until it has trouble settling it off, either with new capital or with free cash flow. So, American Aires' 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 American Aires sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for American to invest in growth at high rates of return. When we think about American Aires' use of debt, we should always consider it together with cash and equity.American Aires 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 American Aires' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of American Aires, which in turn will lower the firm's financial flexibility.Understaning American Aires Use of Financial Leverage
American Aires' financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures American Aires' total debt position, including all outstanding debt obligations, and compares it with American Aires' equity. Financial leverage can amplify the potential profits to American Aires' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if American Aires is unable to cover its debt costs.
American Aires Inc., a nanotechnology company, researches, develops, produces, distributes, and sells proprietary silicon-based microprocessors to protect persons from the harmful effects of electromagnetic radiation that are emitted by electronic devices in Canada. American Aires Inc. was incorporated in 2012 is based in Vaughan, Canada. American Aires operates under Electronic Components classification in the United States and is traded on OTC Exchange. Please read more on our technical analysis page.
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Other Information on Investing in American Pink Sheet
American Aires financial ratios help investors to determine whether American Pink Sheet is cheap or expensive when compared to a particular measure, such as profits or enterprise value. In other words, they help investors to determine the cost of investment in American with respect to the benefits of owning American Aires security.
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.