Advantage Oil Debt
| AAV Stock | CAD 9.37 0.23 2.40% |
Advantage Oil Gas holds a debt-to-equity ratio of 0.082. With a high degree of financial leverage come high-interest payments, which usually reduce Advantage Oil's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Advantage Oil'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. Advantage Oil'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 Advantage Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Advantage Oil's stakeholders.
For most companies, including Advantage Oil, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Advantage Oil Gas, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Advantage Oil'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 Advantage Oil'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 Advantage Oil 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 Advantage Oil to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Advantage Oil is said to be less leveraged. If creditors hold a majority of Advantage Oil's assets, the Company is said to be highly leveraged.
Advantage |
Advantage Oil Gas Debt to Cash Allocation
Advantage Oil Gas has accumulated 353.98 M in total debt with debt to equity ratio (D/E) of 0.08, which may suggest the company is not taking enough advantage from borrowing. Advantage Oil Gas has a current ratio of 0.79, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist Advantage Oil until it has trouble settling it off, either with new capital or with free cash flow. So, Advantage Oil'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 Advantage Oil Gas sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Advantage to invest in growth at high rates of return. When we think about Advantage Oil's use of debt, we should always consider it together with cash and equity.Advantage Oil 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 Advantage Oil's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Advantage Oil, which in turn will lower the firm's financial flexibility.Advantage Oil Corporate Bonds Issued
Understaning Advantage Oil Use of Financial Leverage
Leverage ratios show Advantage Oil's total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Advantage Oil's financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
Advantage Energy Ltd., together with its subsidiaries, acquires, exploits, develops, and produces crude oil, natural gas, and natural gas liquids in the Province of Alberta, Canada. Advantage Energy Ltd. was founded in 2001 and is headquartered in Calgary, Canada. ADVANTAGE OIL operates under Oil Gas EP classification in Canada and is traded on Toronto Stock Exchange. It employs 42 people. Please read more on our technical analysis page.
Pair Trading with Advantage Oil
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Advantage Oil position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Advantage Oil will appreciate offsetting losses from the drop in the long position's value.Moving against Advantage Stock
| 0.4 | ENS | E Split Corp | PairCorr |
| 0.38 | FFH-PC | Fairfax Fin Hld | PairCorr |
| 0.36 | FFH | Fairfax Financial | PairCorr |
| 0.34 | ENB-PFV | Enbridge Pref 5 | PairCorr |
The ability to find closely correlated positions to Advantage Oil could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Advantage Oil when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Advantage Oil - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Advantage Oil Gas to buy it.
The correlation of Advantage Oil is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Advantage Oil moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Advantage Oil Gas moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Advantage Oil can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Other Information on Investing in Advantage Stock
Advantage Oil financial ratios help investors to determine whether Advantage Stock 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 Advantage with respect to the benefits of owning Advantage Oil 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.