Indah Prakasa Debt
| INPS Stock | IDR 162.00 8.00 4.71% |
Indah Prakasa Sentosa holds a debt-to-equity ratio of 2.381. . Indah Prakasa's financial risk is the risk to Indah Prakasa stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Indah Prakasa'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. Indah Prakasa'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 Indah Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Indah Prakasa's stakeholders.
For most companies, including Indah Prakasa, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Indah Prakasa Sentosa, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Indah Prakasa'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 Indah Prakasa'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 Indah Prakasa 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 Indah Prakasa to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Indah Prakasa is said to be less leveraged. If creditors hold a majority of Indah Prakasa's assets, the Company is said to be highly leveraged.
Indah |
Indah Prakasa Sentosa Debt to Cash Allocation
Indah Prakasa Sentosa has accumulated 12.16 B in total debt with debt to equity ratio (D/E) of 2.38, implying the company greatly relies on financing operations through barrowing. Indah Prakasa Sentosa has a current ratio of 0.33, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist Indah Prakasa until it has trouble settling it off, either with new capital or with free cash flow. So, Indah Prakasa'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 Indah Prakasa Sentosa sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Indah to invest in growth at high rates of return. When we think about Indah Prakasa's use of debt, we should always consider it together with cash and equity.Indah Prakasa 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 Indah Prakasa's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Indah Prakasa, which in turn will lower the firm's financial flexibility.Indah Prakasa Corporate Bonds Issued
Understaning Indah Prakasa Use of Financial Leverage
Leverage ratios show Indah Prakasa's total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Indah Prakasa's financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
PT Indah Prakasa Sentosa Tbk. engages in integrated logistics, transportation, distribution, and retail business in fuel, lubricant, chemical, gasses, and FMCG in Indonesia. PT Indah Prakasa Sentosa Tbk. was founded in 1960 and is headquartered in Jakarta, Indonesia. Indah Prakasa operates under Trucking classification in Indonesia and is traded on Jakarta Stock Exchange. It employs 193 people. Please read more on our technical analysis page.
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Indah Prakasa financial ratios help investors to determine whether Indah 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 Indah with respect to the benefits of owning Indah Prakasa 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.