DistIT AB Corporate Bonds and Leverage Analysis
| DIST Stock | SEK 2.34 0.22 10.38% |
DistIT AB has over 320.1 Million in debt which may indicate that it relies heavily on debt financing. . DistIT AB's financial risk is the risk to DistIT AB stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
DistIT AB'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. DistIT AB'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 DistIT Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect DistIT AB's stakeholders.
For most companies, including DistIT AB, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for DistIT AB, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, DistIT AB's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
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Given the importance of DistIT AB's capital structure, the first step in the capital decision process is for the management of DistIT AB 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 DistIT AB to issue bonds at a reasonable cost.
DistIT AB Debt to Cash Allocation
DistIT AB has accumulated 320.1 M in total debt with debt to equity ratio (D/E) of 89.5, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. DistIT AB has a current ratio of 1.51, which is within standard range for the sector. Debt can assist DistIT AB until it has trouble settling it off, either with new capital or with free cash flow. So, DistIT AB'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 DistIT AB sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for DistIT to invest in growth at high rates of return. When we think about DistIT AB's use of debt, we should always consider it together with cash and equity.DistIT AB 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 DistIT AB's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of DistIT AB, which in turn will lower the firm's financial flexibility.DistIT AB Corporate Bonds Issued
Understaning DistIT AB Use of Financial Leverage
DistIT AB's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to DistIT AB's current equity. If creditors own a majority of DistIT AB's assets, the company is considered highly leveraged. Understanding the composition and structure of DistIT AB's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
DistIT AB sells accessories for IT, mobility, home electronics, network, and data communications in the Nordic and Baltic countries. DistIT AB was founded in 1991 and is based in lvsj, Sweden. DistIT AB operates under Computers Phones And Devices classification in Sweden and is traded on Stockholm Stock Exchange. Please read more on our technical analysis page.
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Additional Tools for DistIT Stock Analysis
When running DistIT AB's price analysis, check to measure DistIT AB's 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 DistIT AB is operating at the current time. Most of DistIT AB's value examination focuses on studying past and present price action to predict the probability of DistIT AB's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move DistIT AB's price. Additionally, you may evaluate how the addition of DistIT AB 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.