GSE Systems Debt
| GVPDelisted Stock | USD 4.59 0.01 0.22% |
GSE Systems holds a debt-to-equity ratio of 0.29. . GSE Systems' financial risk is the risk to GSE Systems stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
GSE Systems' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. GSE Systems' 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 GSE Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect GSE Systems' stakeholders.
For most companies, including GSE Systems, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for GSE Systems, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, GSE Systems' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that GSE Systems' 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 GSE Systems 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 GSE Systems to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, GSE Systems is said to be less leveraged. If creditors hold a majority of GSE Systems' assets, the Company is said to be highly leveraged.
GSE |
GSE Systems Debt to Cash Allocation
GSE Systems has 2.04 M in debt with debt to equity (D/E) ratio of 0.29, which may show that the company is not taking advantage of profits from borrowing. GSE Systems has a current ratio of 1.16, demonstrating that it is not liquid enough and may have problems paying out its financial commitments when the payables are due. Note however, debt could still be an excellent tool for GSE to invest in growth at high rates of return.GSE Systems 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 GSE Systems' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of GSE Systems, which in turn will lower the firm's financial flexibility.GSE Systems Corporate Bonds Issued
Understaning GSE Systems Use of Financial Leverage
GSE Systems' financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to GSE Systems' current equity. If creditors own a majority of GSE Systems' assets, the company is considered highly leveraged. Understanding the composition and structure of GSE Systems' outstanding bonds gives an idea of how risky it is and if it is worth investing in.
GSE Systems, Inc. provides professional and technical engineering, staffing services, and simulation software to the power and process industries in the United States, Asia, Europe, and internationally. The company was founded in 1971 and is headquartered in Columbia, Maryland. GSE Systems operates under SoftwareApplication classification in the United States and is traded on NASDAQ Exchange. It employs 286 people. Please read more on our technical analysis page.
Pair Trading with GSE Systems
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 GSE Systems 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 GSE Systems will appreciate offsetting losses from the drop in the long position's value.Moving together with GSE Stock
Moving against GSE Stock
| 0.69 | VERB | VERB TECHNOLOGY PANY Tech Boost | PairCorr |
The ability to find closely correlated positions to GSE Systems could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace GSE Systems 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 GSE Systems - 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 GSE Systems to buy it.
The correlation of GSE Systems 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 GSE Systems moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if GSE Systems 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 GSE Systems 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.Check out Risk vs Return Analysis to better understand how to build diversified portfolios. Also, note that the market value of any company could be closely tied with the direction of predictive economic indicators such as signals in real. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Consideration for investing in GSE Stock
If you are still planning to invest in GSE Systems check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the GSE Systems' history and understand the potential risks before investing.
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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.