Gulf Resources Corporate Bonds and Leverage Analysis
| GURE Stock | USD 0.58 0.01 1.69% |
Gulf Resources holds a debt-to-equity ratio of 0.035. At present, Gulf Resources' Long Term Debt is projected to decrease significantly based on the last few years of reporting. The current year's Long Term Debt Total is expected to grow to about 2 M, whereas Net Debt is forecasted to decline to (93.1 M). . Gulf Resources' financial risk is the risk to Gulf Resources stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Gulf Resources' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Gulf Resources' 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 Gulf Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Gulf Resources' stakeholders.
For most companies, including Gulf Resources, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Gulf Resources, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Gulf Resources' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 0.0371 | Book Value 19.134 | Operating Margin (14.40) | Return On Assets (0.13) | Return On Equity (0.46) |
Gulf |
Given the importance of Gulf Resources' capital structure, the first step in the capital decision process is for the management of Gulf Resources 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 Gulf Resources to issue bonds at a reasonable cost.
Gulf Resources Bond Ratings
Gulf Resources financial ratings play a critical role in determining how much Gulf Resources have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Gulf Resources' borrowing costs.| Piotroski F Score | 4 | Poor | View |
| Beneish M Score | (2.55) | Unlikely Manipulator | View |
Gulf Resources Debt to Cash Allocation
Many companies such as Gulf Resources, 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.
Gulf Resources currently holds 21.42 M in liabilities with Debt to Equity (D/E) ratio of 0.04, which may suggest the company is not taking enough advantage from borrowing. Gulf Resources has a current ratio of 8.05, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Gulf Resources' use of debt, we should always consider it together with its cash and equity.Gulf Resources Total Assets Over Time
Gulf Resources Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Gulf Resources 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.Gulf Resources Debt Ratio | 0.27 |
Gulf Resources Corporate Bonds Issued
Most Gulf bonds can be classified according to their maturity, which is the date when Gulf Resources 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.
Gulf Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Gulf Resources Use of Financial Leverage
Gulf Resources' financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Gulf Resources' total debt position, including all outstanding debt obligations, and compares it with Gulf Resources' equity. Financial leverage can amplify the potential profits to Gulf Resources' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Gulf Resources is unable to cover its debt costs.
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 11.1 M | 6.7 M | |
| Net Debt | -88.7 M | -93.1 M | |
| Short Term Debt | 1.2 M | 1.5 M | |
| Long Term Debt | 1.7 M | 3.4 M | |
| Long Term Debt Total | 1.7 M | 2 M | |
| Short and Long Term Debt | 2.3 M | 2.2 M | |
| Net Debt To EBITDA | 1.34 | 1.41 | |
| Interest Debt Per Share | 0.07 | 0.07 | |
| Long Term Debt To Capitalization | 0.30 | 0.19 | |
| Cash Flow To Debt Ratio | (50.68) | (48.14) |
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Is Commodity Chemicals space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Gulf Resources. If investors know Gulf will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Gulf Resources listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 0.662 | Earnings Share (9.26) | Revenue Per Share 1.552 | Quarterly Revenue Growth (0.70) | Return On Assets (0.13) |
The market value of Gulf Resources is measured differently than its book value, which is the value of Gulf that is recorded on the company's balance sheet. Investors also form their own opinion of Gulf Resources' value that differs from its market value or its book value, called intrinsic value, which is Gulf Resources' 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 Gulf Resources' market value can be influenced by many factors that don't directly affect Gulf Resources' 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 Gulf Resources' value and its price as these two are different measures arrived at by different means. Investors typically determine if Gulf Resources is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Gulf Resources' 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.