Scana ASA Debt
| SCANA Stock | NOK 2.83 0.05 1.74% |
Scana ASA holds a debt-to-equity ratio of 0.566. With a high degree of financial leverage come high-interest payments, which usually reduce Scana ASA's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Scana ASA'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. Scana ASA'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 Scana Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Scana ASA's stakeholders.
For most companies, including Scana ASA, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Scana ASA, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Scana ASA'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 Scana ASA'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 Scana ASA 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 Scana ASA to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Scana ASA is said to be less leveraged. If creditors hold a majority of Scana ASA's assets, the Company is said to be highly leveraged.
Scana |
Scana ASA Debt to Cash Allocation
Scana ASA has accumulated 4.4 M in total debt with debt to equity ratio (D/E) of 0.57, which is about average as compared to similar companies. Scana ASA has a current ratio of 0.95, 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 Scana ASA until it has trouble settling it off, either with new capital or with free cash flow. So, Scana ASA'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 Scana ASA sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Scana to invest in growth at high rates of return. When we think about Scana ASA's use of debt, we should always consider it together with cash and equity.Scana ASA 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 Scana ASA's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Scana ASA, which in turn will lower the firm's financial flexibility.Scana ASA Corporate Bonds Issued
Understaning Scana ASA Use of Financial Leverage
Leverage ratios show Scana ASA's 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 Scana ASA's 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).
Scana ASA, an industrial investment company, provides equipment and services to the marine industry. Scana ASA was founded in 1646 and is headquartered in Bergen, Norway. SCANA ASA operates under Industrial Distribution classification in Norway and is traded on Oslo Stock Exchange. It employs 94 people. Please read more on our technical analysis page.
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Scana ASA financial ratios help investors to determine whether Scana 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 Scana with respect to the benefits of owning Scana ASA 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.