Dampskibsselskabet Debt

DNORD Stock  DKK 213.00  0.60  0.28%   
Dampskibsselskabet holds a debt-to-equity ratio of 1.493. With a high degree of financial leverage come high-interest payments, which usually reduce Dampskibsselskabet's Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

Dampskibsselskabet'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. Dampskibsselskabet'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 Dampskibsselskabet Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Dampskibsselskabet's stakeholders.
For most companies, including Dampskibsselskabet, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Dampskibsselskabet Norden AS, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Dampskibsselskabet'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 Dampskibsselskabet'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 Dampskibsselskabet 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 Dampskibsselskabet to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Dampskibsselskabet is said to be less leveraged. If creditors hold a majority of Dampskibsselskabet's assets, the Company is said to be highly leveraged.
  
Check out the analysis of Dampskibsselskabet Fundamentals Over Time.

Dampskibsselskabet Debt to Cash Allocation

Dampskibsselskabet Norden AS has accumulated 274.3 M in total debt with debt to equity ratio (D/E) of 1.49, which is about average as compared to similar companies. Dampskibsselskabet has a current ratio of 1.23, suggesting that it is not liquid enough and may have problems paying out its financial obligations in time and when they become due. Debt can assist Dampskibsselskabet until it has trouble settling it off, either with new capital or with free cash flow. So, Dampskibsselskabet'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 Dampskibsselskabet sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Dampskibsselskabet to invest in growth at high rates of return. When we think about Dampskibsselskabet's use of debt, we should always consider it together with cash and equity.

Dampskibsselskabet 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 Dampskibsselskabet's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Dampskibsselskabet, which in turn will lower the firm's financial flexibility.

Dampskibsselskabet Corporate Bonds Issued

Most Dampskibsselskabet bonds can be classified according to their maturity, which is the date when Dampskibsselskabet Norden AS 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 Dampskibsselskabet Use of Financial Leverage

Dampskibsselskabet's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Dampskibsselskabet's total debt position, including all outstanding debt obligations, and compares it with Dampskibsselskabet's equity. Financial leverage can amplify the potential profits to Dampskibsselskabet's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Dampskibsselskabet is unable to cover its debt costs.
Dampskibsselskabet NORDEN AS, a shipping company, owns and operates dry cargo and tanker vessels worldwide. Dampskibsselskabet NORDEN AS was founded in 1871 and is headquartered in Hellerup, Denmark. DS Norden operates under Shipping classification in Denmark and is traded on Copenhagen Stock Exchange. It employs 1229 people.
Please read more on our technical analysis page.

Pair Trading with Dampskibsselskabet

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 Dampskibsselskabet 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 Dampskibsselskabet will appreciate offsetting losses from the drop in the long position's value.

Moving together with Dampskibsselskabet Stock

  0.81JYSK Jyske Bank ASPairCorr
  0.66NOVO-B Novo Nordisk ASPairCorr
  0.87ORSTED Orsted ASPairCorr

Moving against Dampskibsselskabet Stock

  0.92RILBA Ringkjoebing LandbobankPairCorr
  0.69SYDB Sydbank ASPairCorr
  0.64SPNO Spar Nord BankPairCorr
The ability to find closely correlated positions to Dampskibsselskabet could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Dampskibsselskabet 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 Dampskibsselskabet - 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 Dampskibsselskabet Norden AS to buy it.
The correlation of Dampskibsselskabet 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 Dampskibsselskabet moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Dampskibsselskabet 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 Dampskibsselskabet 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.
Pair CorrelationCorrelation Matching

Other Information on Investing in Dampskibsselskabet Stock

Dampskibsselskabet financial ratios help investors to determine whether Dampskibsselskabet 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 Dampskibsselskabet with respect to the benefits of owning Dampskibsselskabet 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.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.