Lagercrantz Group Debt
| LAGR-B Stock | SEK 193.80 0.30 0.16% |
Lagercrantz Group has over 1.8 Billion 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 Lagercrantz Group's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Lagercrantz Group'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. Lagercrantz Group'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 Lagercrantz Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Lagercrantz Group's stakeholders.
For most companies, including Lagercrantz Group, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Lagercrantz Group AB, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Lagercrantz Group'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 Lagercrantz Group'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 Lagercrantz Group 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 Lagercrantz Group to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Lagercrantz Group is said to be less leveraged. If creditors hold a majority of Lagercrantz Group's assets, the Company is said to be highly leveraged.
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Lagercrantz Group Debt to Cash Allocation
Lagercrantz Group AB has accumulated 1.8 B in total debt with debt to equity ratio (D/E) of 8.7, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Lagercrantz Group has a current ratio of 0.81, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist Lagercrantz Group until it has trouble settling it off, either with new capital or with free cash flow. So, Lagercrantz Group'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 Lagercrantz Group sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Lagercrantz to invest in growth at high rates of return. When we think about Lagercrantz Group's use of debt, we should always consider it together with cash and equity.Lagercrantz Group 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 Lagercrantz Group's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Lagercrantz Group, which in turn will lower the firm's financial flexibility.Lagercrantz Group Corporate Bonds Issued
Most Lagercrantz bonds can be classified according to their maturity, which is the date when Lagercrantz Group AB 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.
Understaning Lagercrantz Group Use of Financial Leverage
Lagercrantz Group's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Lagercrantz Group's total debt position, including all outstanding debt obligations, and compares it with Lagercrantz Group's equity. Financial leverage can amplify the potential profits to Lagercrantz Group's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Lagercrantz Group is unable to cover its debt costs.
Lagercrantz Group AB operates as a technology company in the Europe, China, and the United states. Lagercrantz Group AB was founded in 1906 and is headquartered in Stockholm, Sweden. Lagercrantz Group operates under Information Technology Services classification in Sweden and is traded on Stockholm Stock Exchange. It employs 1501 people. Please read more on our technical analysis page.
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Lagercrantz Group financial ratios help investors to determine whether Lagercrantz 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 Lagercrantz with respect to the benefits of owning Lagercrantz Group 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.