Belships Morgan Bond
| BELCO Stock | NOK 16.60 0.08 0.48% |
Belships holds a debt-to-equity ratio of 1.369. With a high degree of financial leverage come high-interest payments, which usually reduce Belships' Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Belships' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Belships' 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 Belships Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Belships' stakeholders.
For most companies, including Belships, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Belships, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Belships' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Belships |
Given the importance of Belships' capital structure, the first step in the capital decision process is for the management of Belships 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 Belships to issue bonds at a reasonable cost.
| Popular Name | Belships Morgan Stanley 3971 |
| Equity ISIN Code | NO0003094104 |
| Bond Issue ISIN Code | US61744YAL20 |
Belships Outstanding Bond Obligations
| Boeing Co 2196 | US097023DG73 | Details | |
| Morgan Stanley 3591 | US61744YAK47 | Details | |
| Morgan Stanley 3971 | US61744YAL20 | Details |
Understaning Belships Use of Financial Leverage
Leverage ratios show Belships' 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 Belships' 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).
It operates through Dry Bulk and Technical Management segments. The company was founded in 1918 and is headquartered in Oslo, Norway. BELSHIPS ASA operates under Marine Shipping classification in Norway and is traded on Oslo Stock Exchange. It employs 456 people. Please read more on our technical analysis page.
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Belships financial ratios help investors to determine whether Belships 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 Belships with respect to the benefits of owning Belships 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.