Neuberger Berman High Corporate Bonds and Leverage Analysis
| NHS Fund | USD 7.82 0.06 0.77% |
Neuberger Berman High holds a debt-to-equity ratio of 0.619. . Neuberger Berman's financial risk is the risk to Neuberger Berman stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Neuberger Berman'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. Neuberger Berman's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Fund is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Neuberger Fund's retail investors understand whether an upcoming fall or rise in the market will negatively affect Neuberger Berman's stakeholders.
For most companies, including Neuberger Berman, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Neuberger Berman High, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Neuberger Berman's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
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Given the importance of Neuberger Berman's capital structure, the first step in the capital decision process is for the management of Neuberger Berman 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 Neuberger Berman High to issue bonds at a reasonable cost.
Neuberger Berman High Debt to Cash Allocation
Many companies such as Neuberger Berman, 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.
Neuberger Berman High has 95.32 M in debt with debt to equity (D/E) ratio of 0.62, which is OK given its current industry classification. Neuberger Berman High has a current ratio of 1.21, demonstrating that it may not be capable to disburse its financial commitments when the payables are due. Debt can assist Neuberger Berman until it has trouble settling it off, either with new capital or with free cash flow. So, Neuberger Berman'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 Neuberger Berman High sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Neuberger to invest in growth at high rates of return. When we think about Neuberger Berman's use of debt, we should always consider it together with cash and equity.Neuberger Berman 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 Neuberger Berman's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Neuberger Berman, which in turn will lower the firm's financial flexibility.Neuberger Berman Corporate Bonds Issued
Understaning Neuberger Berman Use of Financial Leverage
Neuberger Berman's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Neuberger Berman's current equity. If creditors own a majority of Neuberger Berman's assets, the company is considered highly leveraged. Understanding the composition and structure of Neuberger Berman's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Neuberger Berman High Yield Strategies Fund Inc. is a closed-ended fixed income mutual fund launched by Neuberger Berman LLC. The fund is managed by Neuberger Berman Investment Advisers LLC. It invests in fixed income markets across the globe. The fund typically invests in high yield debt securities of various sectors, such as auto parts and equipment, airlines, automotive, electronics, health services, packaging, telecom-integratedservices, gaming, and gas distribution. It was formerly known as Neuberger Berman High Yield Strategies Fund. Neuberger Berman High Yield Strategies Fund Inc. was formed on July 28, 2003 and is domiciled in the United States. Please read more on our technical analysis page.
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Neuberger Berman financial ratios help investors to determine whether Neuberger Fund 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 Neuberger with respect to the benefits of owning Neuberger Berman security.
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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.