Swire Properties Debt
| SW9 Stock | EUR 1.91 0.02 1.06% |
Swire Properties has over 15.6 Billion in debt which may indicate that it relies heavily on debt financing. . Swire Properties' financial risk is the risk to Swire Properties stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Swire Properties' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Swire Properties' 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 Swire Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Swire Properties' stakeholders.
For most companies, including Swire Properties, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Swire Properties Limited, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Swire Properties' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Swire Properties' 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 Swire Properties 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 Swire Properties to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Swire Properties is said to be less leveraged. If creditors hold a majority of Swire Properties' assets, the Company is said to be highly leveraged.
Swire |
Swire Properties 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 Swire Properties' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Swire Properties, which in turn will lower the firm's financial flexibility.Swire Properties Corporate Bonds Issued
Most Swire bonds can be classified according to their maturity, which is the date when Swire Properties Limited 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.
Understaning Swire Properties Use of Financial Leverage
Swire Properties' financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Swire Properties' total debt position, including all outstanding debt obligations, and compares it with Swire Properties' equity. Financial leverage can amplify the potential profits to Swire Properties' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Swire Properties is unable to cover its debt costs.
Swire Properties Limited, together with its subsidiaries, develops, owns, and operates mixed-use, primarily commercial properties in Hong Kong, Mainland China, the United States, and internationally. Swire Properties Limited is a subsidiary of Swire Pacific Limited. SWIRE PROPERTIES operates under Real Estate Services classification in Germany and is traded on Frankfurt Stock Exchange. It employs 5000 people. Please read more on our technical analysis page.
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Other Information on Investing in Swire Stock
Swire Properties financial ratios help investors to determine whether Swire 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 Swire with respect to the benefits of owning Swire Properties 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.