H1II34 Current Debt
H1II34 Stock | BRL 15.50 0.90 5.49% |
H1II34 holds a debt-to-equity ratio of 0.933. With a high degree of financial leverage come high-interest payments, which usually reduce H1II34's Earnings Per Share (EPS).
Given that H1II34'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 H1II34 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 H1II34 to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, H1II34 is said to be less leveraged. If creditors hold a majority of H1II34's assets, the Company is said to be highly leveraged.
H1II34 |
H1II34 Debt to Cash Allocation
H1II34 has accumulated 1.85 B in total debt with debt to equity ratio (D/E) of 0.93, which is about average as compared to similar companies. H1II34 has a current ratio of 1.05, 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 H1II34 until it has trouble settling it off, either with new capital or with free cash flow. So, H1II34'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 H1II34 sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for H1II34 to invest in growth at high rates of return. When we think about H1II34's use of debt, we should always consider it together with cash and equity.H1II34 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 H1II34's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of H1II34, which in turn will lower the firm's financial flexibility.Understaning H1II34 Use of Financial Leverage
H1II34's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures H1II34's total debt position, including all outstanding debt obligations, and compares it with H1II34's equity. Financial leverage can amplify the potential profits to H1II34's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if H1II34 is unable to cover its debt costs.
Huntington Ingalls Industries, Inc. engages in designing, building, overhauling, and repairing military ships in the United States. Huntington Ingalls Industries, Inc. was founded in 1886 and is headquartered in Newport News, Virginia. HUNTINGTON IDRN operates under Aerospace Defense classification in Brazil and is traded on Sao Paolo Stock Exchange. It employs 42000 people. Please read more on our technical analysis page.
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H1II34 financial ratios help investors to determine whether H1II34 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 H1II34 with respect to the benefits of owning H1II34 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.