Telkom Indonesia Tbk Corporate Bonds and Leverage Analysis
| TLKM Stock | IDR 2,760 10.00 0.36% |
Telkom Indonesia Tbk holds a debt-to-equity ratio of 0.459. . Telkom Indonesia's financial risk is the risk to Telkom Indonesia stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Telkom Indonesia'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. Telkom Indonesia'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 Telkom Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Telkom Indonesia's stakeholders.
For most companies, including Telkom Indonesia, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Telkom Indonesia Tbk, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Telkom Indonesia's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Telkom |
Given the importance of Telkom Indonesia's capital structure, the first step in the capital decision process is for the management of Telkom Indonesia 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 Telkom Indonesia Tbk to issue bonds at a reasonable cost.
Telkom Indonesia Tbk Debt to Cash Allocation
Telkom Indonesia Tbk has accumulated 46.74 T in total debt with debt to equity ratio (D/E) of 0.46, which is about average as compared to similar companies. Telkom Indonesia Tbk has a current ratio of 0.8, 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 Telkom Indonesia until it has trouble settling it off, either with new capital or with free cash flow. So, Telkom Indonesia'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 Telkom Indonesia Tbk sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Telkom to invest in growth at high rates of return. When we think about Telkom Indonesia's use of debt, we should always consider it together with cash and equity.Telkom Indonesia 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 Telkom Indonesia's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Telkom Indonesia, which in turn will lower the firm's financial flexibility.Telkom Indonesia Corporate Bonds Issued
Understaning Telkom Indonesia Use of Financial Leverage
Leverage ratios show Telkom Indonesia'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 Telkom Indonesia'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).
Perusahaan Perseroan PT Telekomunikasi Indonesia Tbk provides telecommunications, informatics, and network services worldwide. The company was founded in 1884 and is headquartered in Bandung, Indonesia. Telkom Indonesia operates under Telecom Services classification in Indonesia and is traded on Jakarta Stock Exchange. It employs 20778 people. Please read more on our technical analysis page.
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When determining whether Telkom Indonesia Tbk is a good investment, qualitative aspects like company management, corporate governance, and ethical practices play a significant role. A comparison with peer companies also provides context and helps to understand if Telkom Stock is undervalued or overvalued. This multi-faceted approach, blending both quantitative and qualitative analysis, forms a solid foundation for making an informed investment decision about Telkom Indonesia Tbk Stock. Highlighted below are key reports to facilitate an investment decision about Telkom Indonesia Tbk Stock:Check out the analysis of Telkom Indonesia Fundamentals Over Time. You can also try the CEOs Directory module to screen CEOs from public companies around the world.
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.