European Residential Debt
| ERE-UN Stock | CAD 3.63 0.02 0.55% |
European Residential Real holds a debt-to-equity ratio of 2.562. At present, European Residential's Short and Long Term Debt is projected to increase significantly based on the last few years of reporting. The current year's Short Term Debt is expected to grow to about 84.6 M, whereas Net Debt is forecasted to decline to about 579.3 M. With a high degree of financial leverage come high-interest payments, which usually reduce European Residential's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
European Residential'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. European Residential'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 European Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect European Residential's stakeholders.
For most companies, including European Residential, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for European Residential Real, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, European Residential's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 0.5584 | Book Value 4.427 | Operating Margin 0.6837 | Profit Margin (0.49) | Return On Assets 0.0251 |
European |
European Residential Real Debt to Cash Allocation
European Residential Real has accumulated 992.49 M in total debt with debt to equity ratio (D/E) of 2.56, implying the company greatly relies on financing operations through barrowing. European Residential Real has a current ratio of 0.19, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist European Residential until it has trouble settling it off, either with new capital or with free cash flow. So, European Residential'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 European Residential Real sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for European to invest in growth at high rates of return. When we think about European Residential's use of debt, we should always consider it together with cash and equity.European Residential Total Assets Over Time
European Residential Assets Financed by Debt
The debt-to-assets ratio shows the degree to which European Residential uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.European Residential Debt Ratio | 142.0 |
European Residential Corporate Bonds Issued
Most European bonds can be classified according to their maturity, which is the date when European Residential Real 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.
European Net Debt
Net Debt |
|
Understaning European Residential Use of Financial Leverage
European Residential's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures European Residential's total debt position, including all outstanding debt obligations, and compares it with European Residential's equity. Financial leverage can amplify the potential profits to European Residential's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if European Residential is unable to cover its debt costs.
| Last Reported | Projected for Next Year | ||
| Net Debt | 985.6 M | 579.3 M | |
| Short and Long Term Debt Total | 992.5 M | 672.4 M | |
| Long Term Debt | 912 M | 639.6 M | |
| Short and Long Term Debt | 80.5 M | 84.6 M | |
| Short Term Debt | 80.5 M | 84.6 M | |
| Net Debt To EBITDA | (7.65) | (7.27) | |
| Debt To Equity | 2.91 | 4.51 | |
| Interest Debt Per Share | 14.02 | 14.72 | |
| Debt To Assets | 0.72 | 1.42 | |
| Long Term Debt To Capitalization | 0.73 | 0.85 | |
| Total Debt To Capitalization | 0.74 | 0.86 | |
| Debt Equity Ratio | 2.91 | 4.51 | |
| Debt Ratio | 0.72 | 1.42 | |
| Cash Flow To Debt Ratio | 0.04 | 0.02 |
Pair Trading with European Residential
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 European Residential 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 European Residential will appreciate offsetting losses from the drop in the long position's value.Moving against European Stock
The ability to find closely correlated positions to European Residential could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace European Residential 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 European Residential - 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 European Residential Real to buy it.
The correlation of European Residential 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 European Residential moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if European Residential Real 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 European Residential 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 European Stock
European Residential financial ratios help investors to determine whether European 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 European with respect to the benefits of owning European Residential 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.