Sitime Debt
| SITM Stock | USD 211.08 0.58 0.28% |
Sitime holds a debt-to-equity ratio of 0.016. . Sitime's financial risk is the risk to Sitime stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Sitime'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. Sitime'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 Sitime Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Sitime's stakeholders.
For most companies, including Sitime, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Sitime, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Sitime'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 Sitime'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 Sitime 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 Sitime to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Sitime is said to be less leveraged. If creditors hold a majority of Sitime's assets, the Company is said to be highly leveraged.
Sitime |
Sitime Bond Ratings
Sitime financial ratings play a critical role in determining how much Sitime 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 Sitime's borrowing costs.| Piotroski F Score | 6 | Healthy | View |
| Beneish M Score | (2.22) | Unavailable | View |
Sitime Debt to Cash Allocation
Many companies such as Sitime, 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.
Sitime currently holds 8.02 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. Sitime has a current ratio of 14.85, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Sitime's use of debt, we should always consider it together with its cash and equity.Sitime 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 Sitime's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Sitime, which in turn will lower the firm's financial flexibility.Sitime Corporate Bonds Issued
Sitime issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Sitime uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt.
Understaning Sitime Use of Financial Leverage
Leverage ratios show Sitime'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 Sitime'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).
SiTime Corporation designs, develops, and sells silicon timing systems solutions in Taiwan, Hong Kong, the United States, and internationally. SiTime Corporation was incorporated in 2003 and is headquartered in Santa Clara, California. Sitime Corp operates under Semiconductors classification in the United States and is traded on NASDAQ Exchange. It employs 279 people. Please read more on our technical analysis page.
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Is Semiconductors & Semiconductor Equipment 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 Sitime. If investors know Sitime 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 Sitime 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 Sitime is measured differently than its book value, which is the value of Sitime that is recorded on the company's balance sheet. Investors also form their own opinion of Sitime's value that differs from its market value or its book value, called intrinsic value, which is Sitime's 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 Sitime's market value can be influenced by many factors that don't directly affect Sitime's 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 Sitime's value and its price as these two are different measures arrived at by different means. Investors typically determine if Sitime is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Sitime's 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.