Ryanair Holdings plc Corporate Bonds and Leverage Analysis
0RYA Stock | 1,643 57.00 3.59% |
Long Term Debt is expected to rise to about 2.6 B this year, although the value of Net Debt will most likely fall to about 265.6 M. . Ryanair Holdings' financial risk is the risk to Ryanair Holdings stockholders that is caused by an increase in debt.
Change To Liabilities is expected to rise to about 343.7 M this year, although the value of Total Current Liabilities will most likely fall to about 5.6 B. Ryanair |
Given the importance of Ryanair Holdings' capital structure, the first step in the capital decision process is for the management of Ryanair Holdings 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 Ryanair Holdings plc to issue bonds at a reasonable cost.
Ryanair Holdings Other Current Liab Over Time
Ryanair 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 Ryanair Holdings' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Ryanair Holdings, which in turn will lower the firm's financial flexibility.Ryanair Holdings Corporate Bonds Issued
Ryanair Net Debt
Net Debt |
|
Understaning Ryanair Holdings Use of Financial Leverage
Leverage ratios show Ryanair Holdings' total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Ryanair Holdings' financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
Last Reported | Projected for Next Year | ||
Net Debt | 279.5 M | 265.6 M | |
Long Term Debt | 2.5 B | 2.6 B | |
Short and Long Term Debt | 50 M | 47.5 M |
Building efficient market-beating portfolios requires time, education, and a lot of computing power!
The Portfolio Architect is an AI-driven system that provides multiple benefits to our users by leveraging cutting-edge machine learning algorithms, statistical analysis, and predictive modeling to automate the process of asset selection and portfolio construction, saving time and reducing human error for individual and institutional investors.
Try AI Portfolio ArchitectCheck out the analysis of Ryanair Holdings Fundamentals Over Time. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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.