Eastern Commercial Debt
| ECL Stock | THB 0.97 0.02 2.11% |
Eastern Commercial holds a debt-to-equity ratio of 1.996. . Eastern Commercial's financial risk is the risk to Eastern Commercial stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Eastern Commercial'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. Eastern Commercial'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 Eastern Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Eastern Commercial's stakeholders.
For most companies, including Eastern Commercial, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Eastern Commercial Leasing, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Eastern Commercial'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 Eastern Commercial'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 Eastern Commercial 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 Eastern Commercial to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Eastern Commercial is said to be less leveraged. If creditors hold a majority of Eastern Commercial's assets, the Company is said to be highly leveraged.
Eastern |
Eastern Commercial Debt to Cash Allocation
Eastern Commercial Leasing has accumulated 963.03 M in total debt with debt to equity ratio (D/E) of 2.0, which is about average as compared to similar companies. Eastern Commercial has a current ratio of 2.15, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist Eastern Commercial until it has trouble settling it off, either with new capital or with free cash flow. So, Eastern Commercial'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 Eastern Commercial sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Eastern to invest in growth at high rates of return. When we think about Eastern Commercial's use of debt, we should always consider it together with cash and equity.Eastern Commercial 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 Eastern Commercial's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Eastern Commercial, which in turn will lower the firm's financial flexibility.Eastern Commercial Corporate Bonds Issued
Understaning Eastern Commercial Use of Financial Leverage
Leverage ratios show Eastern Commercial'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 Eastern Commercial'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).
Eastern Commercial Leasing Public Company Limited engages in the provision of credit services to personal and juristic person in the form of hire purchase, loans, and sale with right of redemption agreement in Thailand. The company was incorporated in 2003 and is headquartered in Bangkok, Thailand. EASTERN COMMERCIAL operates under Credit Services classification in Thailand and is traded on Stock Exchange of Thailand. Please read more on our technical analysis page.
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Eastern Commercial financial ratios help investors to determine whether Eastern 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 Eastern with respect to the benefits of owning Eastern Commercial 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.