Signature Resources Debt

SGU Stock  CAD 0.03  0.00  0.00%   
Net Debt is likely to drop to about (114.5 K) in 2024. Short and Long Term Debt Total is likely to drop to about 135.6 K in 2024. Signature Resources' financial risk is the risk to Signature Resources stockholders that is caused by an increase in debt.
 
Debt Ratio  
First Reported
2010-12-31
Previous Quarter
0.0234
Current Value
0.0208
Quarterly Volatility
0.00145615
 
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Given that Signature Resources' 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 Signature Resources 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 Signature Resources to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Signature Resources is said to be less leveraged. If creditors hold a majority of Signature Resources' assets, the Company is said to be highly leveraged.
At this time, Signature Resources' Non Current Liabilities Total is fairly stable compared to the past year. Change To Liabilities is likely to climb to about 94 K in 2024, whereas Total Current Liabilities is likely to drop slightly above 1.1 M in 2024.
  
Check out the analysis of Signature Resources Fundamentals Over Time.

Signature Resources Debt to Cash Allocation

Many companies such as Signature Resources, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
Signature Resources has accumulated 1.91 M in total debt. Signature Resources has a current ratio of 0.06, 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 Signature Resources until it has trouble settling it off, either with new capital or with free cash flow. So, Signature Resources' 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 Signature Resources sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Signature to invest in growth at high rates of return. When we think about Signature Resources' use of debt, we should always consider it together with cash and equity.

Signature Resources Total Assets Over Time

Signature Resources Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Signature Resources uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Signature Resources Debt Ratio

    
  2.08   
It appears most of the Signature Resources' assets are financed through equity. 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 Signature Resources' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Signature Resources, which in turn will lower the firm's financial flexibility.

Signature Resources Corporate Bonds Issued

Signature Net Debt

Net Debt

(114,514)

At this time, Signature Resources' Net Debt is fairly stable compared to the past year.

Understaning Signature Resources Use of Financial Leverage

Understanding the structure of Signature Resources' debt obligations provides insight if it is worth investing in it. Financial leverage can amplify the potential profits to Signature Resources' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its cost of debt.
Last ReportedProjected for Next Year
Net Debt-109.1 K-114.5 K
Short and Long Term Debt Total152.6 K135.6 K
Short and Long Term Debt152.6 K135.6 K
Short Term Debt152.6 K135.6 K
Net Debt To EBITDA 0.18  0.17 
Debt To Equity 0.03  0.03 
Debt To Assets 0.02  0.02 
Total Debt To Capitalization 0.03  0.03 
Debt Equity Ratio 0.03  0.03 
Debt Ratio 0.02  0.02 
Cash Flow To Debt Ratio(0.67)(0.70)
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Additional Tools for Signature Stock Analysis

When running Signature Resources' price analysis, check to measure Signature Resources' market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Signature Resources is operating at the current time. Most of Signature Resources' value examination focuses on studying past and present price action to predict the probability of Signature Resources' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Signature Resources' price. Additionally, you may evaluate how the addition of Signature Resources to your portfolios can decrease your overall portfolio volatility.

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.