Star Petroleum Debt
| SPRC Stock | THB 6.60 0.10 1.49% |
Star Petroleum Refining has over 3.37 Billion in debt which may indicate that it relies heavily on debt financing. . Star Petroleum's financial risk is the risk to Star Petroleum stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Star Petroleum'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. Star Petroleum'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 Star Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Star Petroleum's stakeholders.
For most companies, including Star Petroleum, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Star Petroleum Refining, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Star Petroleum'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 Star Petroleum'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 Star Petroleum 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 Star Petroleum to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Star Petroleum is said to be less leveraged. If creditors hold a majority of Star Petroleum's assets, the Company is said to be highly leveraged.
Star |
Star Petroleum Refining Debt to Cash Allocation
Star Petroleum Refining has accumulated 3.37 B in total debt with debt to equity ratio (D/E) of 21.1, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Star Petroleum Refining has a current ratio of 1.64, which is within standard range for the sector. Debt can assist Star Petroleum until it has trouble settling it off, either with new capital or with free cash flow. So, Star Petroleum'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 Star Petroleum Refining sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Star to invest in growth at high rates of return. When we think about Star Petroleum's use of debt, we should always consider it together with cash and equity.Star Petroleum 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 Star Petroleum's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Star Petroleum, which in turn will lower the firm's financial flexibility.Star Petroleum Corporate Bonds Issued
Understaning Star Petroleum Use of Financial Leverage
Leverage ratios show Star Petroleum'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 Star Petroleum'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).
Star Petroleum Refining Public Company Limited owns and operates a petroleum refinery in the Rayong Province of Thailand. Star Petroleum Refining Public Company Limited is a subsidiary of Chevron South Asia Holdings Pte. STAR PETROLEUM operates under Oil Gas Refining Marketing classification in Thailand and is traded on Stock Exchange of Thailand. Please read more on our technical analysis page.
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Star Petroleum financial ratios help investors to determine whether Star 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 Star with respect to the benefits of owning Star Petroleum 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.