ABOV Semiconductor Corporate Bonds and Leverage Analysis
| 102120 Stock | KRW 7,050 540.00 8.29% |
ABOV Semiconductor holds a debt-to-equity ratio of 1.1. With a high degree of financial leverage come high-interest payments, which usually reduce ABOV Semiconductor's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
ABOV Semiconductor'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. ABOV Semiconductor'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 ABOV Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect ABOV Semiconductor's stakeholders.
For most companies, including ABOV Semiconductor, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for ABOV Semiconductor Co, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, ABOV Semiconductor's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
ABOV |
Given the importance of ABOV Semiconductor's capital structure, the first step in the capital decision process is for the management of ABOV Semiconductor 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 ABOV Semiconductor Co to issue bonds at a reasonable cost.
ABOV Semiconductor Debt to Cash Allocation
ABOV Semiconductor Co has accumulated 75.07 M in total debt with debt to equity ratio (D/E) of 1.1, which is about average as compared to similar companies. ABOV Semiconductor has a current ratio of 6.67, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist ABOV Semiconductor until it has trouble settling it off, either with new capital or with free cash flow. So, ABOV Semiconductor'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 ABOV Semiconductor sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for ABOV to invest in growth at high rates of return. When we think about ABOV Semiconductor's use of debt, we should always consider it together with cash and equity.ABOV Semiconductor 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 ABOV Semiconductor's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of ABOV Semiconductor, which in turn will lower the firm's financial flexibility.ABOV Semiconductor Corporate Bonds Issued
Most ABOV bonds can be classified according to their maturity, which is the date when ABOV Semiconductor Co 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 ABOV Semiconductor Use of Financial Leverage
ABOV Semiconductor's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures ABOV Semiconductor's total debt position, including all outstanding debt obligations, and compares it with ABOV Semiconductor's equity. Financial leverage can amplify the potential profits to ABOV Semiconductor's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if ABOV Semiconductor is unable to cover its debt costs.
ABOV Semiconductor Co., Ltd. designs, manufactures, and sells microcontrollers and logic devices in South Korea and internationally. ABOV Semiconductor Co., Ltd. was founded in 2006 and is headquartered in Cheongju, South Korea. ABOV is traded on Korean Securities Dealers Automated Quotations in South Korea. Please read more on our technical analysis page.
Pair Trading with ABOV Semiconductor
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 ABOV Semiconductor 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 ABOV Semiconductor will appreciate offsetting losses from the drop in the long position's value.Moving together with ABOV Stock
| 0.84 | 005930 | Samsung Electronics | PairCorr |
| 0.82 | 005935 | Samsung Electronics | PairCorr |
| 0.8 | 005380 | Hyundai Motor | PairCorr |
Moving against ABOV Stock
The ability to find closely correlated positions to ABOV Semiconductor could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace ABOV Semiconductor 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 ABOV Semiconductor - 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 ABOV Semiconductor Co to buy it.
The correlation of ABOV Semiconductor 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 ABOV Semiconductor moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if ABOV Semiconductor 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 ABOV Semiconductor 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.Other Information on Investing in ABOV Stock
ABOV Semiconductor financial ratios help investors to determine whether ABOV Stock is cheap or expensive when compared to a particular measure, such as profits or enterprise value. In other words, they help investors to determine the cost of investment in ABOV with respect to the benefits of owning ABOV Semiconductor security.
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.