Solar Applied Debt
| 1785 Stock | TWD 59.50 0.80 1.36% |
Solar Applied's financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Solar Applied's financial risk is the risk to Solar Applied stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Given that Solar Applied's 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 Solar Applied 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 Solar Applied to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Solar Applied is said to be less leveraged. If creditors hold a majority of Solar Applied's assets, the Company is said to be highly leveraged.
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Solar Applied 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 Solar Applied's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Solar Applied, which in turn will lower the firm's financial flexibility.Solar Applied Corporate Bonds Issued
Understaning Solar Applied Use of Financial Leverage
Understanding the structure of Solar Applied's debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Solar Applied's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its cost of debt.
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Pair Trading with Solar Applied
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 Solar Applied 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 Solar Applied will appreciate offsetting losses from the drop in the long position's value.Moving together with Solar Stock
Moving against Solar Stock
The ability to find closely correlated positions to Solar Applied could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Solar Applied 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 Solar Applied - 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 Solar Applied Materials to buy it.
The correlation of Solar Applied 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 Solar Applied moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Solar Applied Materials 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 Solar Applied 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 Solar Stock Analysis
When running Solar Applied's price analysis, check to measure Solar Applied'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 Solar Applied is operating at the current time. Most of Solar Applied's value examination focuses on studying past and present price action to predict the probability of Solar Applied's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Solar Applied's price. Additionally, you may evaluate how the addition of Solar Applied 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.