Union Pacific 907818DY1 Bond
| UNP Stock | EUR 233.80 0.70 0.30% |
Union Pacific holds a debt-to-equity ratio of 2.123. . Union Pacific's financial risk is the risk to Union Pacific stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Union Pacific'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. Union Pacific'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 Union Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Union Pacific's stakeholders.
For most companies, including Union Pacific, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Union Pacific, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Union Pacific'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 Union Pacific's capital structure, the first step in the capital decision process is for the management of Union Pacific 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 Union Pacific to issue bonds at a reasonable cost.
| Popular Name | Union Pacific US907818DY13 |
| Equity ISIN Code | US9078181081 |
| Bond Issue ISIN Code | US907818DY13 |
| S&P Rating | Others |
| Maturity Date | Others |
| Issuance Date | Others |
Union Pacific Outstanding Bond Obligations
Understaning Union Pacific Use of Financial Leverage
Union Pacific's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Union Pacific's total debt position, including all outstanding debt obligations, and compares it with Union Pacific's equity. Financial leverage can amplify the potential profits to Union Pacific's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Union Pacific is unable to cover its debt costs.
Union Pacific Corporation, through its subsidiary, Union Pacific Railroad Company, engages in the railroad business in the United States. The company was founded in 1862 and is headquartered in Omaha, Nebraska. UNION PAC operates under Railroads classification in Germany and is traded on Frankfurt Stock Exchange. It employs 29910 people. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in Union Stock
When determining whether Union Pacific is a good investment, qualitative aspects like company management, corporate governance, and ethical practices play a significant role. A comparison with peer companies also provides context and helps to understand if Union Stock is undervalued or overvalued. This multi-faceted approach, blending both quantitative and qualitative analysis, forms a solid foundation for making an informed investment decision about Union Pacific Stock. Highlighted below are key reports to facilitate an investment decision about Union Pacific Stock:Check out the analysis of Union Pacific Fundamentals Over Time. For more detail on how to invest in Union Stock please use our How to Invest in Union Pacific guide.You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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.