Southern First Debt
| SFST Stock | USD 37.58 0.78 2.12% |
Southern First Bancshares has over 311.32 Million in debt which may indicate that it relies heavily on debt financing. . Southern First's financial risk is the risk to Southern First stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Southern First'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. Southern First'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 Southern Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Southern First's stakeholders.
For most companies, including Southern First, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Southern First Bancshares, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Southern First'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 Southern First'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 Southern First 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 Southern First to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Southern First is said to be less leveraged. If creditors hold a majority of Southern First's assets, the Company is said to be highly leveraged.
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Southern First Bancshares Debt to Cash Allocation
Southern First Bancshares currently holds 311.32 M in liabilities with Debt to Equity (D/E) ratio of 11.92, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Note, when we think about Southern First's use of debt, we should always consider it together with its cash and equity.Southern First 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 Southern First's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Southern First, which in turn will lower the firm's financial flexibility.Southern First Corporate Bonds Issued
Understaning Southern First Use of Financial Leverage
Southern First's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Southern First's current equity. If creditors own a majority of Southern First's assets, the company is considered highly leveraged. Understanding the composition and structure of Southern First's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Southern First Bancshares, Inc. operates as the bank holding company for Southern First Bank that provides various banking products and services to general public in South Carolina, North Carolina, and Georgia. The company was incorporated in 1999 and is headquartered in Greenville, South Carolina. Southern First operates under BanksRegional classification in the United States and is traded on NASDAQ Exchange. It employs 278 people. Please read more on our technical analysis page.
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When running Southern First's price analysis, check to measure Southern First'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 Southern First is operating at the current time. Most of Southern First's value examination focuses on studying past and present price action to predict the probability of Southern First's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Southern First's price. Additionally, you may evaluate how the addition of Southern First 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.