Ellington Financial Current Debt

EFC-PE Stock   25.56  0.00  0.00%   
At present, Ellington Financial's Debt To Equity is projected to increase slightly based on the last few years of reporting. The current year's Interest Debt Per Share is expected to grow to 66.65, whereas Net Debt is forecasted to decline to (223.4 M). . Ellington Financial's financial risk is the risk to Ellington Financial stockholders that is caused by an increase in debt.
 
Debt Ratio  
First Reported
2010-12-31
Previous Quarter
0.27
Current Value
0.28
Quarterly Volatility
0.13296462
 
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Covid
The current year's Non Current Liabilities Total is expected to grow to about 13.9 B, whereas Total Current Liabilities is forecasted to decline to about 460.4 M.
  
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Ellington Financial Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Ellington Financial uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Ellington Financial Debt Ratio

    
  28.0   
It looks as if most of the Ellington Financial's assets are financed through equity. 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 Ellington Financial's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Ellington Financial, which in turn will lower the firm's financial flexibility.

Understaning Ellington Financial Use of Financial Leverage

Ellington Financial's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Ellington Financial's total debt position, including all outstanding debt obligations, and compares it with Ellington Financial's equity. Financial leverage can amplify the potential profits to Ellington Financial's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Ellington Financial is unable to cover its debt costs.
Last ReportedProjected for Next Year
Long Term Debt747 M664 M
Short and Long Term Debt Total17.8 M27.7 M
Net Debt-212.7 M-223.4 M
Short Term Debt957 K909.1 K
Net Debt To EBITDA 48.46  46.03 
Debt To Equity 2.73  2.87 
Interest Debt Per Share 63.48  66.65 
Debt To Assets 0.27  0.28 
Long Term Debt To Capitalization 0.45  0.47 
Total Debt To Capitalization 0.68  0.71 
Debt Equity Ratio 2.73  2.87 
Debt Ratio 0.27  0.28 
Cash Flow To Debt Ratio(0.05)(0.05)
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When determining whether Ellington Financial offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Ellington Financial'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 Ellington Financial Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Ellington Financial Stock:
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Please note, there is a significant difference between Ellington Financial's value and its price as these two are different measures arrived at by different means. Investors typically determine if Ellington Financial is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Ellington Financial'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.
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.