Washington Real Estate 404280DR7 Bond

WREDelisted Stock  USD 17.74  0.04  0.22%   
Washington Real Estate holds a debt-to-equity ratio of 0.436. . Washington Real's financial risk is the risk to Washington Real stockholders that is caused by an increase in debt.

Asset vs Debt

Equity vs Debt

Washington Real'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. Washington Real'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 Washington Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Washington Real's stakeholders.
For most companies, including Washington Real, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Washington Real Estate, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Washington Real'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 Washington Real's capital structure, the first step in the capital decision process is for the management of Washington Real 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 Washington Real Estate to issue bonds at a reasonable cost.
Popular NameWashington Real HSBC Holdings PLC
Equity ISIN CodeUS9396531017
Bond Issue ISIN CodeUS404280DR76
S&P Rating
Others
Maturity Date3rd of November 2028
Issuance Date3rd of November 2022
Coupon7.39 %
View All Washington Real Outstanding Bonds

Washington Real Estate Outstanding Bond Obligations

Understaning Washington Real Use of Financial Leverage

Washington Real's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Washington Real's total debt position, including all outstanding debt obligations, and compares it with Washington Real's equity. Financial leverage can amplify the potential profits to Washington Real's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Washington Real is unable to cover its debt costs.
Elme Communities owns and operates uniquely positioned real estate assets in the Washington Metro area. With a track record of driving returns and delivering satisfaction, we are a trusted authority in one of the nations most competitive real estate markets. Washington Real operates under REITOffice classification in the United States and is traded on NYQ Exchange. It employs 53 people.
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Other Consideration for investing in Washington Stock

If you are still planning to invest in Washington Real Estate check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Washington Real's history and understand the potential risks before investing.
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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.