Absolute Clean Current Debt
| ACE Stock | THB 1.29 0.01 0.77% |
Absolute Clean Energy holds a debt-to-equity ratio of 0.381. . Absolute Clean's financial risk is the risk to Absolute Clean stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Absolute Clean'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. Absolute Clean'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 Absolute Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Absolute Clean's stakeholders.
For most companies, including Absolute Clean, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Absolute Clean Energy, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Absolute Clean'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 Absolute Clean'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 Absolute Clean 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 Absolute Clean to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Absolute Clean is said to be less leveraged. If creditors hold a majority of Absolute Clean's assets, the Company is said to be highly leveraged.
Absolute |
Absolute Clean Energy Debt to Cash Allocation
Absolute Clean Energy has accumulated 3.84 B in total debt with debt to equity ratio (D/E) of 0.38, which is about average as compared to similar companies. Absolute Clean Energy has a current ratio of 1.76, which is within standard range for the sector. Debt can assist Absolute Clean until it has trouble settling it off, either with new capital or with free cash flow. So, Absolute Clean'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 Absolute Clean Energy sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Absolute to invest in growth at high rates of return. When we think about Absolute Clean's use of debt, we should always consider it together with cash and equity.Absolute Clean 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 Absolute Clean's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Absolute Clean, which in turn will lower the firm's financial flexibility.Understaning Absolute Clean Use of Financial Leverage
Leverage ratios show Absolute Clean'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 Absolute Clean'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).
Absolute Clean Energy Public Company Limited, together with its subsidiaries, operates biomass, municipal solid waste, natural gas, and solar energy power plants in Thailand. The company was founded in 2015 and is headquartered in Bangkok, Thailand. ABSOLUTE CLEAN is traded on Stock Exchange of Thailand in Thailand. Please read more on our technical analysis page.
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Absolute Clean financial ratios help investors to determine whether Absolute 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 Absolute with respect to the benefits of owning Absolute Clean 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.