Telephone and Data Corporate Bonds and Leverage Analysis

TDS Stock  USD 34.04  1.04  3.15%   
Telephone and Data holds a debt-to-equity ratio of 0.7. At this time, Telephone's Debt Equity Ratio is comparatively stable compared to the past year. Debt Ratio is likely to gain to 0.33 in 2024, whereas Long Term Debt Total is likely to drop slightly above 2.7 B in 2024. . Telephone's financial risk is the risk to Telephone stockholders that is caused by an increase in debt.

Asset vs Debt

Equity vs Debt

Telephone'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. Telephone'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 Telephone Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Telephone's stakeholders.
For most companies, including Telephone, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Telephone and Data, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Telephone'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
0.966
Book Value
35.407
Operating Margin
0.0392
Profit Margin
(0.11)
Return On Assets
0.0091
At this time, Telephone's Non Current Liabilities Total is comparatively stable compared to the past year. Change To Liabilities is likely to gain to about 150.3 M in 2024, whereas Total Current Liabilities is likely to drop slightly above 833.7 M in 2024.
  
Check out the analysis of Telephone Fundamentals Over Time.
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Given the importance of Telephone's capital structure, the first step in the capital decision process is for the management of Telephone 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 Telephone and Data to issue bonds at a reasonable cost.

Telephone Bond Ratings

Telephone and Data financial ratings play a critical role in determining how much Telephone 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 Telephone's borrowing costs.
Piotroski F Score
4
PoorView
Beneish M Score
(4.23)
Unlikely ManipulatorView

Telephone and Data Debt to Cash Allocation

Many companies such as Telephone, 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.
Telephone and Data has 5.14 B in debt with debt to equity (D/E) ratio of 0.7, which is OK given its current industry classification. Telephone and Data has a current ratio of 1.45, which is typical for the industry and considered as normal. Note however, debt could still be an excellent tool for Telephone to invest in growth at high rates of return.

Telephone Total Assets Over Time

Telephone Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Telephone 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.

Telephone Debt Ratio

    
  33.0   
It appears slightly above 67% of Telephone's assets are financed through equity. 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 Telephone's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Telephone, which in turn will lower the firm's financial flexibility.

Telephone Corporate Bonds Issued

Telephone Short Long Term Debt Total

Short Long Term Debt Total

5.4 Billion

At this time, Telephone's Short and Long Term Debt Total is comparatively stable compared to the past year.

Understaning Telephone Use of Financial Leverage

Telephone's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Telephone's current equity. If creditors own a majority of Telephone's assets, the company is considered highly leveraged. Understanding the composition and structure of Telephone's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Last ReportedProjected for Next Year
Short and Long Term Debt Total5.1 B5.4 B
Net Debt4.9 B5.2 B
Short Term Debt320 M336 M
Long Term Debt4.1 B2.7 B
Long Term Debt Total4.3 B2.7 B
Short and Long Term Debt26 M14.7 M
Net Debt To EBITDA 7.20  7.55 
Debt To Equity 0.82  0.87 
Interest Debt Per Share 39.80  41.79 
Debt To Assets 0.31  0.33 
Long Term Debt To Capitalization 0.44  0.42 
Total Debt To Capitalization 0.45  0.45 
Debt Equity Ratio 0.82  0.87 
Debt Ratio 0.31  0.33 
Cash Flow To Debt Ratio 0.27  0.29 
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Additional Tools for Telephone Stock Analysis

When running Telephone's price analysis, check to measure Telephone'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 Telephone is operating at the current time. Most of Telephone's value examination focuses on studying past and present price action to predict the probability of Telephone's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Telephone's price. Additionally, you may evaluate how the addition of Telephone 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.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.