RF Industries Debt
| RFIL Stock | USD 4.07 0.07 1.69% |
RF Industries holds a debt-to-equity ratio of 0.8. . RF Industries' financial risk is the risk to RF Industries stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
RF Industries' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. RF Industries' 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 RFIL Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect RF Industries' stakeholders.
For most companies, including RF Industries, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for RF Industries, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, RF Industries' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that RF Industries' 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 RF Industries 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 RF Industries to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, RF Industries is said to be less leveraged. If creditors hold a majority of RF Industries' assets, the Company is said to be highly leveraged.
RFIL |
RF Industries Bond Ratings
RF Industries financial ratings play a critical role in determining how much RF Industries have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for RF Industries' borrowing costs.| Piotroski F Score | 6 | Healthy | View |
| Beneish M Score | (2.55) | Unlikely Manipulator | View |
RF Industries Debt to Cash Allocation
Many companies such as RF Industries, 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.
RF Industries currently holds 34.74 M in liabilities with Debt to Equity (D/E) ratio of 0.8, which is about average as compared to similar companies. RF Industries has a current ratio of 2.71, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about RF Industries' use of debt, we should always consider it together with its cash and equity.RF Industries 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 RF Industries' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of RF Industries, which in turn will lower the firm's financial flexibility.RF Industries Corporate Bonds Issued
Understaning RF Industries Use of Financial Leverage
Leverage ratios show RF Industries' total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of RF Industries' financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
RF Industries, Ltd., together with its subsidiaries, designs, manufactures, and markets interconnect products and systems in the United States, Canada, Mexico, and internationally. RF Industries, Ltd. was incorporated in 1979 and is headquartered in San Diego, California. RF Industries operates under Electrical Equipment Parts classification in the United States and is traded on NASDAQ Exchange. It employs 300 people. Please read more on our technical analysis page.
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Is Electronic Equipment, Instruments & Components space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of RF Industries. If investors know RFIL will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about RF Industries listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of RF Industries is measured differently than its book value, which is the value of RFIL that is recorded on the company's balance sheet. Investors also form their own opinion of RF Industries' value that differs from its market value or its book value, called intrinsic value, which is RF Industries' true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because RF Industries' market value can be influenced by many factors that don't directly affect RF Industries' underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between RF Industries' value and its price as these two are different measures arrived at by different means. Investors typically determine if RF Industries is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, RF Industries' price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
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.