Cinemark Holdings Debt
| ZZA Stock | EUR 30.64 0.27 0.87% |
Cinemark Holdings has over 2.47 Billion in debt which may indicate that it relies heavily on debt financing. . Cinemark Holdings' financial risk is the risk to Cinemark Holdings stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Cinemark Holdings' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Cinemark Holdings' 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 Cinemark Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Cinemark Holdings' stakeholders.
For most companies, including Cinemark Holdings, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Cinemark Holdings, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Cinemark Holdings' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Cinemark Holdings' debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Cinemark Holdings is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Cinemark Holdings to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Cinemark Holdings is said to be less leveraged. If creditors hold a majority of Cinemark Holdings' assets, the Company is said to be highly leveraged.
Cinemark |
Cinemark Holdings Debt to Cash Allocation
Many companies such as Cinemark Holdings, 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.
Cinemark Holdings has accumulated 2.47 B in total debt with debt to equity ratio (D/E) of 224.6, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Cinemark Holdings has a current ratio of 0.93, 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 Cinemark Holdings until it has trouble settling it off, either with new capital or with free cash flow. So, Cinemark Holdings' 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 Cinemark Holdings sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Cinemark to invest in growth at high rates of return. When we think about Cinemark Holdings' use of debt, we should always consider it together with cash and equity.Cinemark Holdings 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 Cinemark Holdings' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Cinemark Holdings, which in turn will lower the firm's financial flexibility.Cinemark Holdings Corporate Bonds Issued
Most Cinemark bonds can be classified according to their maturity, which is the date when Cinemark Holdings 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 Cinemark Holdings Use of Financial Leverage
Cinemark Holdings' financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Cinemark Holdings' total debt position, including all outstanding debt obligations, and compares it with Cinemark Holdings' equity. Financial leverage can amplify the potential profits to Cinemark Holdings' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Cinemark Holdings is unable to cover its debt costs.
Cinemark Holdings, Inc., together with its subsidiaries, engages in the motion picture exhibition business. The company was founded in 1984 and is headquartered in Plano, Texas. CINEMARK HLDGS operates under Media - Diversified classification in Germany and is traded on Frankfurt Stock Exchange. It employs 11610 people. Please read more on our technical analysis page.
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Additional Information and Resources on Investing in Cinemark Stock
When determining whether Cinemark Holdings 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 Cinemark 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 Cinemark Holdings Stock. Highlighted below are key reports to facilitate an investment decision about Cinemark Holdings Stock:Check out the analysis of Cinemark Holdings Fundamentals Over Time. For more detail on how to invest in Cinemark Stock please use our How to Invest in Cinemark Holdings guide.You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.
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.