Goldman Sachs Access GOLDMAN Bond
| GSST Etf | USD 50.46 0.03 0.06% |
Goldman Sachs' financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Goldman Sachs' financial risk is the risk to Goldman Sachs stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Goldman |
Given the importance of Goldman Sachs' capital structure, the first step in the capital decision process is for the management of Goldman Sachs 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 Goldman Sachs Access to issue bonds at a reasonable cost.
| Popular Name | Goldman Sachs GOLDMAN SACHS GROUP |
| Equity ISIN Code | US3814302309 |
| Bond Issue ISIN Code | US38143CBA80 |
| S&P Rating | Others |
| Maturity Date | 15th of February 2038 |
| Issuance Date | 7th of February 2013 |
| Coupon | 4.25 % |
Goldman Sachs Access Outstanding Bond Obligations
Understaning Goldman Sachs Use of Financial Leverage
Goldman Sachs' financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Goldman Sachs' current equity. If creditors own a majority of Goldman Sachs' assets, the company is considered highly leveraged. Understanding the composition and structure of Goldman Sachs' outstanding bonds gives an idea of how risky it is and if it is worth investing in.
The fund seeks to achieve its investment objective by investing, under normal circumstances, at least 80 percent of its net assets plus any borrowings for investment purposes in a broad range of U.S. dollar denominated bonds. GS Access is traded on BATS Exchange in the United States. Please read more on our technical analysis page.
Thematic Opportunities
Explore Investment Opportunities
Check out the analysis of Goldman Sachs Fundamentals Over Time. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
The market value of Goldman Sachs Access is measured differently than its book value, which is the value of Goldman that is recorded on the company's balance sheet. Investors also form their own opinion of Goldman Sachs' value that differs from its market value or its book value, called intrinsic value, which is Goldman Sachs' true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Goldman Sachs' market value can be influenced by many factors that don't directly affect Goldman Sachs' underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Goldman Sachs' value and its price as these two are different measures arrived at by different means. Investors typically determine if Goldman Sachs is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Goldman Sachs' price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
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.