Colbun Debt
COLBUN Stock | CLP 119.75 1.00 0.83% |
Colbun has over 1.93 Billion in debt which may indicate that it relies heavily on debt financing. With a high degree of financial leverage come high-interest payments, which usually reduce Colbun's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Colbun'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. Colbun'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 Colbun Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Colbun's stakeholders.
For most companies, including Colbun, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Colbun, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Colbun'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 Colbun'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 Colbun 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 Colbun to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Colbun is said to be less leveraged. If creditors hold a majority of Colbun's assets, the Company is said to be highly leveraged.
Colbun |
Colbun Debt to Cash Allocation
Colbun has accumulated 1.93 B in total debt with debt to equity ratio (D/E) of 45.8, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Colbun has a current ratio of 3.73, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist Colbun until it has trouble settling it off, either with new capital or with free cash flow. So, Colbun'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 Colbun sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Colbun to invest in growth at high rates of return. When we think about Colbun's use of debt, we should always consider it together with cash and equity.Colbun 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 Colbun's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Colbun, which in turn will lower the firm's financial flexibility.Colbun Corporate Bonds Issued
Most Colbun bonds can be classified according to their maturity, which is the date when Colbun has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Understaning Colbun Use of Financial Leverage
Colbun's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Colbun's total debt position, including all outstanding debt obligations, and compares it with Colbun's equity. Financial leverage can amplify the potential profits to Colbun's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Colbun is unable to cover its debt costs.
Colbn S.A., together with its subsidiaries, engages in the production, transportation, distribution, and supply of energy, electricity, and natural gas to regulated and deregulated customers in Chile and Peru. The company was founded in 1986 and is based in Santiago, Chile. COLBUN S is traded on Commodity Exchange in Exotistan. Please read more on our technical analysis page.
Pair Trading with Colbun
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 Colbun 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 Colbun will appreciate offsetting losses from the drop in the long position's value.Moving against Colbun Stock
0.62 | AFPCAPITAL | AFP Capital SA | PairCorr |
The ability to find closely correlated positions to Colbun could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Colbun 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 Colbun - 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 Colbun to buy it.
The correlation of Colbun 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 Colbun moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Colbun 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 Colbun 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 Colbun Stock
Colbun financial ratios help investors to determine whether Colbun 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 Colbun with respect to the benefits of owning Colbun 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.