Applied Materials Debt
| AMAT Stock | USD 192.05 5.57 2.99% |
Applied Materials holds a debt-to-equity ratio of 0.447. . Applied Materials' financial risk is the risk to Applied Materials stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Applied Materials' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Applied Materials' 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 Applied Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Applied Materials' stakeholders.
For most companies, including Applied Materials, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Applied Materials, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Applied Materials' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Applied Materials' 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 Applied Materials 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 Applied Materials to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Applied Materials is said to be less leveraged. If creditors hold a majority of Applied Materials' assets, the Company is said to be highly leveraged.
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Applied Materials Bond Ratings
Applied Materials financial ratings play a critical role in determining how much Applied Materials have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Applied Materials' borrowing costs.| Piotroski F Score | 7 | Strong | View |
| Beneish M Score | (2.46) | Unlikely Manipulator | View |
Applied Materials Debt to Cash Allocation
Applied Materials currently holds 6.26 B in liabilities with Debt to Equity (D/E) ratio of 0.45, which is about average as compared to similar companies. Applied Materials has a current ratio of 2.12, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Applied Materials' use of debt, we should always consider it together with its cash and equity.Applied Materials 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 Applied Materials' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Applied Materials, which in turn will lower the firm's financial flexibility.Applied Materials Corporate Bonds Issued
Understaning Applied Materials Use of Financial Leverage
Applied Materials' financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Applied Materials' current equity. If creditors own a majority of Applied Materials' assets, the company is considered highly leveraged. Understanding the composition and structure of Applied Materials' outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Applied Materials, Inc. engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. Applied Materials, Inc. was incorporated in 1967 and is headquartered in Santa Clara, California. Applied Materials operates under Semiconductor Equipment Materials classification in the United States and is traded on NASDAQ Exchange. It employs 33300 people. Please read more on our technical analysis page.
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Additional Tools for Applied Stock Analysis
When running Applied Materials' price analysis, check to measure Applied Materials' 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 Applied Materials is operating at the current time. Most of Applied Materials' value examination focuses on studying past and present price action to predict the probability of Applied Materials' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Applied Materials' price. Additionally, you may evaluate how the addition of Applied Materials 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.