Centrais Eltricas Debt
| ELET3 Stock | BRL 35.12 0.51 1.43% |
Centrais Eltricas has over 36.47 Billion in debt which may indicate that it relies heavily on debt financing. . Centrais Eltricas' financial risk is the risk to Centrais Eltricas stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Centrais Eltricas' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Centrais Eltricas' 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 Centrais Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Centrais Eltricas' stakeholders.
For most companies, including Centrais Eltricas, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Centrais Eltricas Brasileiras, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Centrais Eltricas' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Centrais Eltricas' 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 Centrais Eltricas 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 Centrais Eltricas to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Centrais Eltricas is said to be less leveraged. If creditors hold a majority of Centrais Eltricas' assets, the Company is said to be highly leveraged.
Centrais |
Centrais Eltricas Debt to Cash Allocation
Many companies such as Centrais Eltricas, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
Centrais Eltricas Brasileiras has accumulated 36.47 B in total debt with debt to equity ratio (D/E) of 97.4, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Centrais Eltricas has a current ratio of 1.31, which is within standard range for the sector. Debt can assist Centrais Eltricas until it has trouble settling it off, either with new capital or with free cash flow. So, Centrais Eltricas' 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 Centrais Eltricas sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Centrais to invest in growth at high rates of return. When we think about Centrais Eltricas' use of debt, we should always consider it together with cash and equity.Centrais Eltricas 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 Centrais Eltricas' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Centrais Eltricas, which in turn will lower the firm's financial flexibility.Centrais Eltricas Corporate Bonds Issued
Understaning Centrais Eltricas Use of Financial Leverage
Centrais Eltricas' financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Centrais Eltricas' current equity. If creditors own a majority of Centrais Eltricas' assets, the company is considered highly leveraged. Understanding the composition and structure of Centrais Eltricas' outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Centrais Eltricas Brasileiras S.A. - Eletrobras, through its subsidiaries, engages in the generation, transmission, and distribution of electricity in Brazil. The company was founded in 1962 and is based in Rio de Janeiro, Brazil. ELETROBRAS operates under Utilities - Regulated Electric classification in Brazil and is traded on Sao Paolo Stock Exchange. It employs 14211 people. Please read more on our technical analysis page.
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When running Centrais Eltricas' price analysis, check to measure Centrais Eltricas' 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 Centrais Eltricas is operating at the current time. Most of Centrais Eltricas' value examination focuses on studying past and present price action to predict the probability of Centrais Eltricas' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Centrais Eltricas' price. Additionally, you may evaluate how the addition of Centrais Eltricas 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.