Red Violet Corporate Bonds and Leverage Analysis
| RDVT Stock | USD 36.49 0.46 1.24% |
Red Violet holds a debt-to-equity ratio of 0.023. At this time, Red Violet's Long Term Debt is comparatively stable compared to the past year. Long Term Debt Total is likely to gain to about 2.1 M in 2024, whereas Short and Long Term Debt Total is likely to drop slightly above 2.1 M in 2024. . Red Violet's financial risk is the risk to Red Violet stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Red Violet'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. Red Violet'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 Red Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Red Violet's stakeholders.
For most companies, including Red Violet, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Red Violet, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Red Violet's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 5.4896 | Book Value 6.674 | Operating Margin 0.1311 | Profit Margin 0.0717 | Return On Assets 0.043 |
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Given the importance of Red Violet's capital structure, the first step in the capital decision process is for the management of Red Violet 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 Red Violet to issue bonds at a reasonable cost.
Red Violet Debt to Cash Allocation
Red Violet currently holds 2.57 M in liabilities with Debt to Equity (D/E) ratio of 0.02, which may suggest the company is not taking enough advantage from borrowing. Red Violet has a current ratio of 10.95, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Red Violet's use of debt, we should always consider it together with its cash and equity.Red Violet Total Assets Over Time
Red Violet Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Red Violet 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.Red Violet Debt Ratio | 0.58 |
Red Violet Corporate Bonds Issued
Red Long Term Debt
Long Term Debt |
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Understaning Red Violet Use of Financial Leverage
Red Violet's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Red Violet's current equity. If creditors own a majority of Red Violet's assets, the company is considered highly leveraged. Understanding the composition and structure of Red Violet's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
| Last Reported | Projected for Next Year | ||
| Long Term Debt | 2 M | 2.1 M | |
| Long Term Debt Total | 2 M | 2.1 M | |
| Short and Long Term Debt | 516.4 K | 542.2 K | |
| Short Term Debt | 1.1 M | 641.4 K | |
| Net Debt | -29.5 M | -28 M | |
| Short and Long Term Debt Total | 2.6 M | 2.1 M | |
| Net Debt To EBITDA | (2.71) | (2.85) | |
| Debt To Equity | 0.01 | 0.01 | |
| Interest Debt Per Share | 0.04 | 0.05 | |
| Debt To Assets | 0.01 | 0.01 | |
| Long Term Debt To Capitalization | 0.03 | 0.03 | |
| Total Debt To Capitalization | 0.01 | 0.01 | |
| Debt Equity Ratio | 0.01 | 0.01 | |
| Debt Ratio | 0.01 | 0.01 | |
| Cash Flow To Debt Ratio | 26.49 | 27.81 |
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Additional Tools for Red Stock Analysis
When running Red Violet's price analysis, check to measure Red Violet's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Red Violet is operating at the current time. Most of Red Violet's value examination focuses on studying past and present price action to predict the probability of Red Violet's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Red Violet's price. Additionally, you may evaluate how the addition of Red Violet to your portfolios can decrease your overall portfolio volatility.
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.