Ulta Beauty Current Debt
| U1LT34 Stock | BRL 128.10 1.70 1.31% |
Ulta Beauty holds a debt-to-equity ratio of 0.985. With a high degree of financial leverage come high-interest payments, which usually reduce Ulta Beauty's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Ulta Beauty'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. Ulta Beauty'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 Ulta Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Ulta Beauty's stakeholders.
For most companies, including Ulta Beauty, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Ulta Beauty, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Ulta Beauty's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Ulta Beauty's 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 Ulta Beauty 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 Ulta Beauty to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Ulta Beauty is said to be less leveraged. If creditors hold a majority of Ulta Beauty's assets, the Company is said to be highly leveraged.
Ulta |
Ulta Beauty Debt to Cash Allocation
Ulta Beauty has accumulated 1.85 B in total debt with debt to equity ratio (D/E) of 0.99, which is about average as compared to similar companies. Ulta Beauty has a current ratio of 1.77, which is within standard range for the sector. Debt can assist Ulta Beauty until it has trouble settling it off, either with new capital or with free cash flow. So, Ulta Beauty'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 Ulta Beauty sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Ulta to invest in growth at high rates of return. When we think about Ulta Beauty's use of debt, we should always consider it together with cash and equity.Ulta Beauty 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 Ulta Beauty's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Ulta Beauty, which in turn will lower the firm's financial flexibility.Understaning Ulta Beauty Use of Financial Leverage
Ulta Beauty's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Ulta Beauty's total debt position, including all outstanding debt obligations, and compares it with Ulta Beauty's equity. Financial leverage can amplify the potential profits to Ulta Beauty's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Ulta Beauty is unable to cover its debt costs.
Ulta Beauty, Inc. operates as a retailer of beauty products in the United States. Ulta Beauty, Inc. was founded in 1990 and is based in Bolingbrook, Illinois. ULTA BEAUTY operates under Specialty Retail classification in Brazil and is traded on Sao Paolo Stock Exchange. It employs 16000 people. Please read more on our technical analysis page.
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When determining whether Ulta Beauty offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Ulta Beauty's 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 Ulta Beauty Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Ulta Beauty Stock:Check out the analysis of Ulta Beauty Fundamentals Over Time. For information on how to trade Ulta Stock refer to our How to Trade Ulta Stock guide.You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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.