FLEX LNG Debt
| FLNG Stock | NOK 290.00 1.20 0.41% |
FLEX LNG holds a debt-to-equity ratio of 1.931. . FLEX LNG's financial risk is the risk to FLEX LNG stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
FLEX LNG'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. FLEX LNG'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 FLEX Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect FLEX LNG's stakeholders.
For most companies, including FLEX LNG, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for FLEX LNG, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, FLEX LNG'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 FLEX LNG'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 FLEX LNG 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 FLEX LNG to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, FLEX LNG is said to be less leveraged. If creditors hold a majority of FLEX LNG's assets, the Company is said to be highly leveraged.
FLEX |
FLEX LNG Debt to Cash Allocation
Many companies such as FLEX LNG, 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.
FLEX LNG has accumulated 1.55 B in total debt with debt to equity ratio (D/E) of 1.93, which is about average as compared to similar companies. FLEX LNG has a current ratio of 1.17, suggesting that it is not liquid enough and may have problems paying out its financial obligations in time and when they become due. Debt can assist FLEX LNG until it has trouble settling it off, either with new capital or with free cash flow. So, FLEX LNG'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 FLEX LNG sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for FLEX to invest in growth at high rates of return. When we think about FLEX LNG's use of debt, we should always consider it together with cash and equity.FLEX LNG 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 FLEX LNG's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of FLEX LNG, which in turn will lower the firm's financial flexibility.FLEX LNG Corporate Bonds Issued
Understaning FLEX LNG Use of Financial Leverage
Leverage ratios show FLEX LNG'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 FLEX LNG'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).
Flex LNG Ltd., through its subsidiaries, engages in the seaborne transportation of liquefied natural gas worldwide. Flex LNG Ltd. was incorporated in 2006 and is based in Hamilton, Bermuda. FLEX LNG operates under Oil Gas Midstream classification in Norway and is traded on Oslo Stock Exchange. It employs 9 people. Please read more on our technical analysis page.
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When determining whether FLEX LNG is a strong investment it is important to analyze FLEX LNG's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact FLEX LNG's future performance. For an informed investment choice regarding FLEX Stock, refer to the following important reports:Check out the analysis of FLEX LNG Fundamentals Over Time. For more information on how to buy FLEX Stock please use our How to buy in FLEX Stock guide.You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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.