ATAI Life Debt
| ATAI Stock | USD 1.33 0.03 2.21% |
ATAI Life Sciences holds a debt-to-equity ratio of 0.057. With a high degree of financial leverage come high-interest payments, which usually reduce ATAI Life's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
ATAI Life'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. ATAI Life'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 ATAI Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect ATAI Life's stakeholders.
For most companies, including ATAI Life, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for ATAI Life Sciences, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, ATAI Life's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that ATAI Life'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 ATAI Life 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 ATAI Life to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, ATAI Life is said to be less leveraged. If creditors hold a majority of ATAI Life's assets, the Company is said to be highly leveraged.
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ATAI Life Sciences Debt to Cash Allocation
As ATAI Life Sciences follows its natural business cycle, the capital allocation decisions will not magically go away. ATAI Life's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors.
ATAI Life Sciences currently holds 19.14 M in liabilities with Debt to Equity (D/E) ratio of 0.06, which may suggest the company is not taking enough advantage from borrowing. ATAI Life Sciences has a current ratio of 12.01, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about ATAI Life's use of debt, we should always consider it together with its cash and equity.ATAI Life 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 ATAI Life's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of ATAI Life, which in turn will lower the firm's financial flexibility.ATAI Life Corporate Bonds Issued
Most ATAI bonds can be classified according to their maturity, which is the date when ATAI Life Sciences 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 ATAI Life Use of Financial Leverage
Understanding the composition and structure of ATAI Life's debt gives an idea of how risky is the capital structure of the business and if it is worth investing in it. The degree of ATAI Life's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Atai Life Sciences N.V., through its subsidiary, ATAI Life Sciences AG, operates as a clinical-stage biopharmaceutical company. Atai Life Sciences N.V. was founded in 2018 and is headquartered in Berlin, Germany. Atai Life operates under Biotechnology classification in the United States and is traded on NASDAQ Exchange. It employs 87 people. Please read more on our technical analysis page.
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When determining whether ATAI Life Sciences offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of ATAI Life's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Atai Life Sciences Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Atai Life Sciences Stock:Check out the analysis of ATAI Life Fundamentals Over Time. You can also try the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
Is Biotechnology space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of ATAI Life. If investors know ATAI will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about ATAI Life listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of ATAI Life Sciences is measured differently than its book value, which is the value of ATAI that is recorded on the company's balance sheet. Investors also form their own opinion of ATAI Life's value that differs from its market value or its book value, called intrinsic value, which is ATAI Life's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because ATAI Life's market value can be influenced by many factors that don't directly affect ATAI Life's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between ATAI Life's value and its price as these two are different measures arrived at by different means. Investors typically determine if ATAI Life is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, ATAI Life's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
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.