Geodrill Limited Morgan Bond
| GEO Stock | CAD 2.86 0.06 2.14% |
Geodrill Limited has over 978,287 in debt which may indicate that it relies heavily on debt financing. With a high degree of financial leverage come high-interest payments, which usually reduce Geodrill's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Geodrill'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. Geodrill'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 Geodrill Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Geodrill's stakeholders.
For most companies, including Geodrill, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Geodrill Limited, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Geodrill's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Geodrill |
Given the importance of Geodrill's capital structure, the first step in the capital decision process is for the management of Geodrill 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 Geodrill Limited to issue bonds at a reasonable cost.
| Popular Name | Geodrill Morgan Stanley 3591 |
| Specialization | Other Industrial Metals & Mining |
| Equity ISIN Code | IM00B3RLCZ58 |
| Bond Issue ISIN Code | US61744YAK47 |
| S&P Rating | Others |
| Maturity Date | 22nd of July 2028 |
| Issuance Date | 24th of July 2017 |
| Coupon | 3.591 % |
Geodrill Limited Outstanding Bond Obligations
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Understaning Geodrill Use of Financial Leverage
Leverage ratios show Geodrill'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 Geodrill'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).
Geodrill Limited, together with its subsidiaries, provides exploration and development drilling services to various mining companies with exploration, development, and production operations in West Africa and the African copper belt. Geodrill Limited was founded in 1998 and is headquartered in Douglas, Isle of Man. GEODRILL operates under Industrial Metals Minerals classification in Canada and is traded on Toronto Stock Exchange. It employs 34 people. Please read more on our technical analysis page.
Pair Trading with Geodrill
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 Geodrill 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 Geodrill will appreciate offsetting losses from the drop in the long position's value.Moving together with Geodrill Stock
Moving against Geodrill Stock
The ability to find closely correlated positions to Geodrill could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Geodrill 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 Geodrill - 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 Geodrill Limited to buy it.
The correlation of Geodrill 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 Geodrill moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Geodrill Limited 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 Geodrill 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 Geodrill Stock
Geodrill financial ratios help investors to determine whether Geodrill 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 Geodrill with respect to the benefits of owning Geodrill 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.