Allied Motion Techno Corporate Bonds and Leverage Analysis
| AMOTDelisted Stock | USD 39.17 0.12 0.31% |
Allied Motion Techno holds a debt-to-equity ratio of 1.257. . Allied Motion's financial risk is the risk to Allied Motion stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Allied Motion'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. Allied Motion'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 Allied Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Allied Motion's stakeholders.
For most companies, including Allied Motion, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Allied Motion Technologies, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Allied Motion's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Allied |
Given the importance of Allied Motion's capital structure, the first step in the capital decision process is for the management of Allied Motion 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 Allied Motion Technologies to issue bonds at a reasonable cost.
Allied Motion Techno Debt to Cash Allocation
Allied Motion Technologies currently holds 258.85 M in liabilities with Debt to Equity (D/E) ratio of 1.26, which is about average as compared to similar companies. Allied Motion Techno has a current ratio of 2.33, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Allied Motion's use of debt, we should always consider it together with its cash and equity.Allied Motion 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 Allied Motion's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Allied Motion, which in turn will lower the firm's financial flexibility.Allied Motion Corporate Bonds Issued
Understaning Allied Motion Use of Financial Leverage
Allied Motion's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Allied Motion's current equity. If creditors own a majority of Allied Motion's assets, the company is considered highly leveraged. Understanding the composition and structure of Allied Motion's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Allied Motion Technologies Inc., together with its subsidiaries, designs, manufactures, and sells precision and specialty controlled motion components and systems that are used in a range of industries worldwide. Allied Motion Technologies Inc. was incorporated in 1962 and is headquartered in Amherst, New York. Allied Motion operates under Electronic Components classification in the United States and is traded on NASDAQ Exchange. It employs 1950 people. Please read more on our technical analysis page.
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Other Consideration for investing in Allied Stock
If you are still planning to invest in Allied Motion Techno check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Allied Motion's history and understand the potential risks before investing.
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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.