Wisconsin Electric Power Corporate Bonds and Leverage Analysis
| WELPP Stock | USD 68.00 0.41 0.61% |
Wisconsin Electric Power has over 2.86 Billion in debt which may indicate that it relies heavily on debt financing. . Wisconsin Electric's financial risk is the risk to Wisconsin Electric stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Wisconsin Electric'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. Wisconsin Electric's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the OTC Stock is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Wisconsin OTC Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Wisconsin Electric's stakeholders.
For most companies, including Wisconsin Electric, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Wisconsin Electric Power, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Wisconsin Electric'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 Wisconsin Electric's capital structure, the first step in the capital decision process is for the management of Wisconsin Electric 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 Wisconsin Electric Power to issue bonds at a reasonable cost.
Wisconsin Electric Power Debt to Cash Allocation
Wisconsin Electric Power has accumulated 2.86 B in total debt with debt to equity ratio (D/E) of 159.9, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Wisconsin Electric Power has a current ratio of 0.9, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist Wisconsin Electric until it has trouble settling it off, either with new capital or with free cash flow. So, Wisconsin Electric'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 Wisconsin Electric Power sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Wisconsin to invest in growth at high rates of return. When we think about Wisconsin Electric's use of debt, we should always consider it together with cash and equity.Wisconsin Electric 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 Wisconsin Electric's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Wisconsin Electric, which in turn will lower the firm's financial flexibility.Wisconsin Electric Corporate Bonds Issued
Understaning Wisconsin Electric Use of Financial Leverage
Wisconsin Electric's financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to Wisconsin Electric's current equity. If creditors own a majority of Wisconsin Electric's assets, the company is considered highly leveraged. Understanding the composition and structure of Wisconsin Electric's outstanding bonds gives an idea of how risky it is and if it is worth investing in.
Wisconsin Electric Power Company operates as an electric, natural gas, and steam utility company in the United States. Wisconsin Electric Power Company is a subsidiary of WEC Energy Group, Inc. Wisconsin Electric operates under Utilities - Regulated Electric classification in USA and is traded on OTC Market. It employs 2945 people. Please read more on our technical analysis page.
Pair Trading with Wisconsin Electric
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Wisconsin Electric position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wisconsin Electric will appreciate offsetting losses from the drop in the long position's value.Moving against Wisconsin OTC Stock
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The ability to find closely correlated positions to Wisconsin Electric could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Wisconsin Electric when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Wisconsin Electric - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Wisconsin Electric Power to buy it.
The correlation of Wisconsin Electric is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Wisconsin Electric moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Wisconsin Electric Power moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Wisconsin Electric can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Additional Tools for Wisconsin OTC Stock Analysis
When running Wisconsin Electric's price analysis, check to measure Wisconsin Electric'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 Wisconsin Electric is operating at the current time. Most of Wisconsin Electric's value examination focuses on studying past and present price action to predict the probability of Wisconsin Electric's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Wisconsin Electric's price. Additionally, you may evaluate how the addition of Wisconsin Electric 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.