Embassy Bancorp Debt
EMYB Stock | USD 16.45 0.25 1.54% |
Embassy Bancorp holds a debt-to-equity ratio of 0.0561. With a high degree of financial leverage come high-interest payments, which usually reduce Embassy Bancorp's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Embassy Bancorp'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. Embassy Bancorp's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the OTC Stock is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Embassy OTC Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Embassy Bancorp's stakeholders.
For most companies, including Embassy Bancorp, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Embassy Bancorp, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Embassy Bancorp'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 Embassy Bancorp's debt-to-equity ratio measures a OTC Stock's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Embassy Bancorp 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 Embassy Bancorp to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Embassy Bancorp is said to be less leveraged. If creditors hold a majority of Embassy Bancorp's assets, the OTC Stock is said to be highly leveraged.
Embassy |
Embassy Bancorp Debt to Cash Allocation
Embassy Bancorp currently holds 14.65 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. Debt can assist Embassy Bancorp until it has trouble settling it off, either with new capital or with free cash flow. So, Embassy Bancorp'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 Embassy Bancorp sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Embassy to invest in growth at high rates of return. When we think about Embassy Bancorp's use of debt, we should always consider it together with cash and equity.Embassy Bancorp 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 Embassy Bancorp's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Embassy Bancorp, which in turn will lower the firm's financial flexibility.Embassy Bancorp Corporate Bonds Issued
Most Embassy bonds can be classified according to their maturity, which is the date when Embassy Bancorp 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 Embassy Bancorp Use of Financial Leverage
Embassy Bancorp's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Embassy Bancorp's total debt position, including all outstanding debt obligations, and compares it with Embassy Bancorp's equity. Financial leverage can amplify the potential profits to Embassy Bancorp's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Embassy Bancorp is unable to cover its debt costs.
Embassy Bancorp, Inc. operates as the bank holding company for the Embassy Bank for the Lehigh Valley that provides traditional banking and related financial services to individual, business, and government customers in Pennsylvania. Embassy Bancorp, Inc. was founded in 2001 and is headquartered in Bethlehem, Pennsylvania. Embassy Bancorp operates under BanksRegional classification in the United States and is traded on OTC Exchange. It employs 106 people. Please read more on our technical analysis page.
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Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.Other Information on Investing in Embassy OTC Stock
Embassy Bancorp financial ratios help investors to determine whether Embassy OTC 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 Embassy with respect to the benefits of owning Embassy Bancorp 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.