PharmChem 552953CD1 Bond
PCHM Stock | USD 3.05 0.00 0.00% |
PharmChem holds a debt-to-equity ratio of 0.37. . PharmChem's financial risk is the risk to PharmChem stockholders that is caused by an increase in debt.
PharmChem |
Given the importance of PharmChem's capital structure, the first step in the capital decision process is for the management of PharmChem to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of PharmChem to issue bonds at a reasonable cost.
Popular Name | PharmChem MGM Resorts International |
Equity ISIN Code | US7171331025 |
Bond Issue ISIN Code | US552953CD18 |
S&P Rating | Others |
Maturity Date | 1st of September 2026 |
Issuance Date | 19th of August 2016 |
Coupon | 4.625 % |
PharmChem Outstanding Bond Obligations
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Understaning PharmChem Use of Financial Leverage
Leverage ratios show PharmChem'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 PharmChem'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).
PharmChem, Inc. provides PharmChek Sweat Patch that is used to detect drugs of abuse. Its PharmChek Sweat Patch uses sweat as the source and offers alternative to urine testing for cocaine, opiates, amphetamines, PCP, and marijuana. Pharmchem is traded on OTC Exchange in the United States. Please read more on our technical analysis page.
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Try AI Portfolio ArchitectOther Information on Investing in PharmChem Pink Sheet
PharmChem financial ratios help investors to determine whether PharmChem Pink Sheet 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 PharmChem with respect to the benefits of owning PharmChem 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.