Hektas Ticaret Debt

HEKTS Stock  TRY 4.13  0.01  0.24%   
Hektas Ticaret TAS has over 30.25 Million in debt which may indicate that it relies heavily on debt financing. With a high degree of financial leverage come high-interest payments, which usually reduce Hektas Ticaret's Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

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

Hektas Ticaret TAS Debt to Cash Allocation

Hektas Ticaret TAS has accumulated 30.25 M in total debt with debt to equity ratio (D/E) of 161.5, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Hektas Ticaret TAS has a current ratio of 1.66, which is within standard range for the sector. Debt can assist Hektas Ticaret until it has trouble settling it off, either with new capital or with free cash flow. So, Hektas Ticaret'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 Hektas Ticaret TAS sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Hektas to invest in growth at high rates of return. When we think about Hektas Ticaret's use of debt, we should always consider it together with cash and equity.

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

Hektas Ticaret Corporate Bonds Issued

Most Hektas bonds can be classified according to their maturity, which is the date when Hektas Ticaret TAS 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 Hektas Ticaret Use of Financial Leverage

Understanding the composition and structure of Hektas Ticaret's debt gives an idea of how risky is the capital structure of the business and if it is worth investing in it. The degree of Hektas Ticaret's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Hektas Ticaret T.A.S. manufactures and markets agricultural chemicals and veterinary pharmaceuticals primarily in Turkey. Hektas Ticaret T.A.S. was founded in 1956 and is headquartered in Gebze, Turkey. HEKTAS operates under Agricultural Inputs classification in Turkey and is traded on Istanbul Stock Exchange.
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Other Information on Investing in Hektas Stock

Hektas Ticaret financial ratios help investors to determine whether Hektas 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 Hektas with respect to the benefits of owning Hektas Ticaret 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.