Sumitomo Mitsui Financial Corporate Bonds and Leverage Analysis
| SMFG Stock | USD 14.27 0.21 1.49% |
Sumitomo Mitsui Financial has over 34.26 Trillion in debt which may indicate that it relies heavily on debt financing. At this time, Sumitomo Mitsui's Long Term Debt To Capitalization is most likely to slightly decrease in the upcoming years. . Sumitomo Mitsui's financial risk is the risk to Sumitomo Mitsui stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Sumitomo Mitsui'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. Sumitomo Mitsui'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 Sumitomo Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Sumitomo Mitsui's stakeholders.
For most companies, including Sumitomo Mitsui, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Sumitomo Mitsui Financial, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Sumitomo Mitsui'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 0.973 | Book Value 3.7 K | Operating Margin 0.4049 | Profit Margin 0.2692 | Return On Assets 0.0035 |
Sumitomo |
Given the importance of Sumitomo Mitsui's capital structure, the first step in the capital decision process is for the management of Sumitomo Mitsui 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 Sumitomo Mitsui Financial to issue bonds at a reasonable cost.
Sumitomo Mitsui Bond Ratings
Sumitomo Mitsui Financial financial ratings play a critical role in determining how much Sumitomo Mitsui 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 Sumitomo Mitsui's borrowing costs.| Piotroski F Score | 4 | Poor | View |
| Beneish M Score | (2.72) | Unlikely Manipulator | View |
Sumitomo Mitsui Financial Debt to Cash Allocation
Many companies such as Sumitomo Mitsui, 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.
Sumitomo Mitsui Financial currently holds 34.26 T in liabilities with Debt to Equity (D/E) ratio of 18.37, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Note, when we think about Sumitomo Mitsui's use of debt, we should always consider it together with its cash and equity.Sumitomo Mitsui Total Assets Over Time
Sumitomo Mitsui Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Sumitomo Mitsui 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.Sumitomo Mitsui Debt Ratio | 5.78 |
Sumitomo Mitsui Corporate Bonds Issued
Most Sumitomo bonds can be classified according to their maturity, which is the date when Sumitomo Mitsui Financial has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Sumitomo Short Long Term Debt Total
Short Long Term Debt Total |
|
Understaning Sumitomo Mitsui Use of Financial Leverage
Sumitomo Mitsui's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Sumitomo Mitsui's total debt position, including all outstanding debt obligations, and compares it with Sumitomo Mitsui's equity. Financial leverage can amplify the potential profits to Sumitomo Mitsui's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Sumitomo Mitsui is unable to cover its debt costs.
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 34.3 T | 18 T | |
| Net Debt | -43.9 T | -41.7 T | |
| Short Term Debt | 5.6 T | 3.9 T | |
| Long Term Debt | 28.7 T | 30.1 T | |
| Short and Long Term Debt | 5.6 T | 5 T | |
| Long Term Debt Total | 28.1 T | 18.1 T | |
| Net Debt To EBITDA | (39.16) | (37.20) | |
| Debt To Equity | 1.79 | 1.39 | |
| Interest Debt Per Share | 23 K | 24.2 K | |
| Debt To Assets | 0.09 | 0.06 | |
| Long Term Debt To Capitalization | 0.59 | 0.68 | |
| Total Debt To Capitalization | 0.64 | 0.44 | |
| Debt Equity Ratio | 1.79 | 1.39 | |
| Debt Ratio | 0.09 | 0.06 | |
| Cash Flow To Debt Ratio | 0.19 | 0.18 |
Currently Active Assets on Macroaxis
When determining whether Sumitomo Mitsui Financial is a strong investment it is important to analyze Sumitomo Mitsui's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Sumitomo Mitsui's future performance. For an informed investment choice regarding Sumitomo Stock, refer to the following important reports:Check out the analysis of Sumitomo Mitsui Fundamentals Over Time. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Is Diversified Banks 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 Sumitomo Mitsui. If investors know Sumitomo 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 Sumitomo Mitsui listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 0.525 | Earnings Share 1.15 | Revenue Per Share 567.4788 | Quarterly Revenue Growth 0.183 | Return On Assets 0.0035 |
The market value of Sumitomo Mitsui Financial is measured differently than its book value, which is the value of Sumitomo that is recorded on the company's balance sheet. Investors also form their own opinion of Sumitomo Mitsui's value that differs from its market value or its book value, called intrinsic value, which is Sumitomo Mitsui'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 Sumitomo Mitsui's market value can be influenced by many factors that don't directly affect Sumitomo Mitsui'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 Sumitomo Mitsui's value and its price as these two are different measures arrived at by different means. Investors typically determine if Sumitomo Mitsui is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Sumitomo Mitsui'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.