Sun Communities Valero Bond

SCZ Stock  EUR 118.00  2.00  1.72%   
Sun Communities has over 5 Billion in debt which may indicate that it relies heavily on debt financing. . Sun Communities' financial risk is the risk to Sun Communities stockholders that is caused by an increase in debt.

Asset vs Debt

Equity vs Debt

Sun Communities' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Sun Communities' 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 Sun Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Sun Communities' stakeholders.
For most companies, including Sun Communities, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Sun Communities, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Sun Communities' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
  
Check out the analysis of Sun Communities Fundamentals Over Time.
For more detail on how to invest in Sun Stock please use our How to Invest in Sun Communities guide.
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Given the importance of Sun Communities' capital structure, the first step in the capital decision process is for the management of Sun Communities 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 Sun Communities to issue bonds at a reasonable cost.
Popular NameSun Communities Valero Energy Partners
Equity ISIN CodeUS8666741041
Bond Issue ISIN CodeUS91914JAA07
S&P Rating
Others
Maturity Date15th of December 2026
Issuance Date9th of December 2016
Coupon4.375 %
View All Sun Communities Outstanding Bonds

Sun Communities Outstanding Bond Obligations

Understaning Sun Communities Use of Financial Leverage

Sun Communities' financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Sun Communities' total debt position, including all outstanding debt obligations, and compares it with Sun Communities' equity. Financial leverage can amplify the potential profits to Sun Communities' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Sun Communities is unable to cover its debt costs.
Sun Communities, Inc. is a REIT that, as of March 31, 2019, owned, operated, or had an interest in a portfolio of 379 communities comprising over 132,000 developed sites in 31 states and Ontario, Canada. Sun Communities operates under REIT - Residential classification in Germany and is traded on Frankfurt Stock Exchange. It employs 2784 people.
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Additional Information and Resources on Investing in Sun Stock

When determining whether Sun Communities offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Sun Communities' financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Sun Communities Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Sun Communities Stock:
Check out the analysis of Sun Communities Fundamentals Over Time.
For more detail on how to invest in Sun Stock please use our How to Invest in Sun Communities guide.
You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Please note, there is a significant difference between Sun Communities' value and its price as these two are different measures arrived at by different means. Investors typically determine if Sun Communities is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Sun Communities' price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

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.