Tekfen Holding AS Corporate Bonds and Leverage Analysis
| TKFEN Stock | TRY 77.30 0.40 0.51% |
Tekfen Holding AS has over 294.78 Million in debt which may indicate that it relies heavily on debt financing. With a high degree of financial leverage come high-interest payments, which usually reduce Tekfen Holding's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Tekfen Holding'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. Tekfen Holding'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 Tekfen Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Tekfen Holding's stakeholders.
For most companies, including Tekfen Holding, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Tekfen Holding AS, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Tekfen Holding's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
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Given the importance of Tekfen Holding's capital structure, the first step in the capital decision process is for the management of Tekfen Holding 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 Tekfen Holding AS to issue bonds at a reasonable cost.
Tekfen Holding AS Debt to Cash Allocation
Tekfen Holding AS has accumulated 294.78 M in total debt with debt to equity ratio (D/E) of 16.7, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Tekfen Holding AS has a current ratio of 1.3, suggesting that it may have difficulties to pay its financial obligations in time and when they become due. Debt can assist Tekfen Holding until it has trouble settling it off, either with new capital or with free cash flow. So, Tekfen Holding'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 Tekfen Holding AS sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Tekfen to invest in growth at high rates of return. When we think about Tekfen Holding's use of debt, we should always consider it together with cash and equity.Tekfen Holding 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 Tekfen Holding's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Tekfen Holding, which in turn will lower the firm's financial flexibility.Tekfen Holding Corporate Bonds Issued
Most Tekfen bonds can be classified according to their maturity, which is the date when Tekfen Holding AS 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 Tekfen Holding Use of Financial Leverage
Understanding the composition and structure of Tekfen Holding's debt gives an idea of how risky is the capital structure of the business and if it is worth investing in it. The degree of Tekfen Holding's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Tekfen Holding Anonim Sirketi, together with its subsidiaries, engages in contracting, agriculture, real estate, and other businesses in Turkey, CIS countries, Northern Africa, the Middle Eastern countries, and internationally. Tekfen Holding Anonim Sirketi was founded in 1956 and is based in Istanbul, Turkey. TEKFEN HOLDING operates under Agricultural Inputs classification in Turkey and is traded on Istanbul Stock Exchange. It employs 16885 people. Please read more on our technical analysis page.
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Tekfen Holding financial ratios help investors to determine whether Tekfen 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 Tekfen with respect to the benefits of owning Tekfen Holding 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.