ALBEMARLE CODRN Current Financial Leverage

A1LB34
  

BRL 1,528  0.000054  0.00%   

ALBEMARLE CODRN's financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. ALBEMARLE CODRN's financial risk is the risk to ALBEMARLE CODRN stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
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Given that ALBEMARLE CODRN'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 ALBEMARLE CODRN 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 ALBEMARLE CODRN to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, ALBEMARLE CODRN is said to be less leveraged. If creditors hold a majority of ALBEMARLE CODRN's assets, the company is said to be highly leveraged.
Given the importance of ALBEMARLE CODRN's capital structure, the first step in the capital decision process is for the management of ALBEMARLE CODRN 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 ALBEMARLE CODRN to issue bonds at a reasonable cost.

ALBEMARLE CODRN Financial Leverage Rating

ALBEMARLE CODRN bond ratings play a critical role in determining how much ALBEMARLE CODRN have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for ALBEMARLE CODRN's borrowing costs.

ALBEMARLE CODRN Debt to Cash Allocation

As ALBEMARLE CODRN follows its natural business cycle, the capital allocation decisions will not magically go away. ALBEMARLE CODRN's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies 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.
The company has accumulated 2.16 B in total debt with debt to equity ratio (D/E) of 0.36, which is about average as compared to similar companies. ALBEMARLE CODRN has a current ratio of 2.07, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist ALBEMARLE CODRN until it has trouble settling it off, either with new capital or with free cash flow. So, ALBEMARLE CODRN'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 ALBEMARLE CODRN sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for ALBEMARLE to invest in growth at high rates of return. When we think about ALBEMARLE CODRN's use of debt, we should always consider it together with cash and equity.

ALBEMARLE CODRN 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 ALBEMARLE CODRN's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of ALBEMARLE CODRN, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a an ALBEMARLE CODRN debt ratio should be compared their industry average or other competing firms.

Understaning ALBEMARLE CODRN Use of Financial Leverage

ALBEMARLE CODRN financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures ALBEMARLE CODRN's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of ALBEMARLE CODRN assets, the company is considered highly leveraged. Understanding the composition and structure of overall ALBEMARLE CODRN debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it.
Albemarle Corporation develops, manufactures, and markets engineered specialty chemicals worldwide. Albemarle Corporation was founded in 1887 and is headquartered in Charlotte, North Carolina. ALBEMARLE CODRN operates under Specialty Chemicals classification in Brazil and is traded on Sao Paolo Stock Exchange. It employs 5900 people.
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ALBEMARLE CODRN Investors Sentiment

The influence of ALBEMARLE CODRN's investor sentiment on the probability of its price appreciation or decline could be a good factor in your decision-making process regarding taking a position in ALBEMARLE. The overall investor sentiment generally increases the direction of a stock movement in a one-year investment horizon. However, the impact of investor sentiment on the entire stock markets does not have a solid backing from leading economists and market statisticians.
Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards ALBEMARLE CODRN in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, ALBEMARLE CODRN's short interest history, or implied volatility extrapolated from ALBEMARLE CODRN options trading.

Pair Trading with ALBEMARLE CODRN

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if ALBEMARLE CODRN position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ALBEMARLE CODRN will appreciate offsetting losses from the drop in the long position's value.
The ability to find closely correlated positions to ALBEMARLE CODRN could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace ALBEMARLE CODRN when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back ALBEMARLE CODRN - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling ALBEMARLE CODRN to buy it.
The correlation of ALBEMARLE CODRN is a statistical measure of how it moves in relation to other equities. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as ALBEMARLE CODRN moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if ALBEMARLE CODRN moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for ALBEMARLE CODRN can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
Please continue to Trending Equities. Note that the ALBEMARLE CODRN information on this page should be used as a complementary analysis to other ALBEMARLE CODRN's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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When running ALBEMARLE CODRN price analysis, check to measure ALBEMARLE CODRN's 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 ALBEMARLE CODRN is operating at the current time. Most of ALBEMARLE CODRN's value examination focuses on studying past and present price action to predict the probability of ALBEMARLE CODRN's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move ALBEMARLE CODRN's price. Additionally, you may evaluate how the addition of ALBEMARLE CODRN to your portfolios can decrease your overall portfolio volatility.
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Please note, there is a significant difference between ALBEMARLE CODRN's value and its price as these two are different measures arrived at by different means. Investors typically determine ALBEMARLE CODRN value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, ALBEMARLE CODRN's 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.