Stars Microelectronics Debt
| SMT Stock | THB 1.69 0.02 1.20% |
Stars Microelectronics has over 528.42 Million in debt which may indicate that it relies heavily on debt financing. . Stars Microelectronics' financial risk is the risk to Stars Microelectronics stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Stars Microelectronics' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Stars Microelectronics' 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 Stars Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Stars Microelectronics' stakeholders.
For most companies, including Stars Microelectronics, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Stars Microelectronics Public, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Stars Microelectronics' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Stars Microelectronics' 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 Stars Microelectronics 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 Stars Microelectronics to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Stars Microelectronics is said to be less leveraged. If creditors hold a majority of Stars Microelectronics' assets, the Company is said to be highly leveraged.
Stars |
Stars Microelectronics Debt to Cash Allocation
Stars Microelectronics Public has accumulated 528.42 M in total debt with debt to equity ratio (D/E) of 92.5, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Stars Microelectronics has a current ratio of 0.55, 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 Stars Microelectronics until it has trouble settling it off, either with new capital or with free cash flow. So, Stars Microelectronics' 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 Stars Microelectronics sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Stars to invest in growth at high rates of return. When we think about Stars Microelectronics' use of debt, we should always consider it together with cash and equity.Stars Microelectronics 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 Stars Microelectronics' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Stars Microelectronics, which in turn will lower the firm's financial flexibility.Stars Microelectronics Corporate Bonds Issued
Understaning Stars Microelectronics Use of Financial Leverage
Leverage ratios show Stars Microelectronics' 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 Stars Microelectronics' 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).
Stars Microelectronics Public Company Limited, together with its subsidiaries, provides electronics manufacturing services in Thailand and the United States. Stars Microelectronics Public Company Limited is headquartered in Ayutthaya, Thailand. STARS MICROELECTRONICS operates under Contract Manufacturers classification in Thailand and is traded on Stock Exchange of Thailand. Please read more on our technical analysis page.
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Stars Microelectronics financial ratios help investors to determine whether Stars 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 Stars with respect to the benefits of owning Stars Microelectronics 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.