Nutrien Debt
| N7T Stock | EUR 44.81 1.10 2.52% |
Nutrien holds a debt-to-equity ratio of 0.512. . Nutrien's financial risk is the risk to Nutrien stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Nutrien'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. Nutrien'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 Nutrien Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Nutrien's stakeholders.
For most companies, including Nutrien, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Nutrien, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Nutrien'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 Nutrien'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 Nutrien 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 Nutrien to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Nutrien is said to be less leveraged. If creditors hold a majority of Nutrien's assets, the Company is said to be highly leveraged.
Nutrien |
Nutrien Debt to Cash Allocation
Many companies such as Nutrien, 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.
Nutrien has accumulated 8.04 B in total debt with debt to equity ratio (D/E) of 0.51, which is about average as compared to similar companies. Nutrien has a current ratio of 1.32, which is within standard range for the sector. Debt can assist Nutrien until it has trouble settling it off, either with new capital or with free cash flow. So, Nutrien'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 Nutrien sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Nutrien to invest in growth at high rates of return. When we think about Nutrien's use of debt, we should always consider it together with cash and equity.Nutrien 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 Nutrien's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Nutrien, which in turn will lower the firm's financial flexibility.Nutrien Corporate Bonds Issued
Most Nutrien bonds can be classified according to their maturity, which is the date when Nutrien 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 Nutrien Use of Financial Leverage
Nutrien's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Nutrien's total debt position, including all outstanding debt obligations, and compares it with Nutrien's equity. Financial leverage can amplify the potential profits to Nutrien's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Nutrien is unable to cover its debt costs.
The company offers potash, nitrogen, phosphate, and sulfate products and financial solutions. The company was incorporated in 2017 and is headquartered in Saskatoon, Canada. NUTRIEN operates under Agricultural Inputs classification in Germany and is traded on Frankfurt Stock Exchange. It employs 23100 people. Please read more on our technical analysis page.
Currently Active Assets on Macroaxis
Additional Information and Resources on Investing in Nutrien Stock
When determining whether Nutrien is a strong investment it is important to analyze Nutrien's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Nutrien's future performance. For an informed investment choice regarding Nutrien Stock, refer to the following important reports:Check out the analysis of Nutrien Fundamentals Over Time. For more detail on how to invest in Nutrien Stock please use our How to Invest in Nutrien guide.You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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.