General Dynamics Bonds

GD
 Stock
  

USD 219.55  5.02  2.34%   

General Dynamics' 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. General Dynamics' financial risk is the risk to General Dynamics 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).
Please check the analysis of General Dynamics Fundamentals Over Time.
  
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General Dynamics Debt to Equity Ratio is projected to increase slightly based on the last few years of reporting. The past year's Debt to Equity Ratio was at 1.84

General Current Financial Burden

General Dynamics' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. General Dynamics' 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 General Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect General Dynamics' stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including General Dynamics, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running General Dynamics Corp the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book
3.45
Book Value
64.99
Operating Margin
0.11
Profit Margin
0.0852
Return On Assets
0.0543
Return On Equity
0.2
Given that General Dynamics' 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 General Dynamics 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 General Dynamics to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, General Dynamics is said to be less leveraged. If creditors hold a majority of General Dynamics' assets, the company is said to be highly leveraged.

General Dynamics Quarterly Debt to Equity Ratio

1.824

Given the importance of General Dynamics' capital structure, the first step in the capital decision process is for the management of General Dynamics 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 General Dynamics Corp to issue bonds at a reasonable cost.

General Dynamics Bond Ratings

General Dynamics Corp bond ratings play a critical role in determining how much General Dynamics 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 General Dynamics' borrowing costs.
Piotroski F Score
6  Healthy
Beneish M Score

General Dynamics Corp Debt to Cash Allocation

As General Dynamics Corp follows its natural business cycle, the capital allocation decisions will not magically go away. General Dynamics' 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 reports 13.17 B of total liabilities with total debt to equity ratio (D/E) of 0.73, which is normal for its line of buisiness. General Dynamics Corp has a current ratio of 1.45, which is generally considered normal. Debt can assist General Dynamics until it has trouble settling it off, either with new capital or with free cash flow. So, General Dynamics' 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 General Dynamics Corp sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for General to invest in growth at high rates of return. When we think about General Dynamics' use of debt, we should always consider it together with cash and equity.

General Dynamics Inventories Over Time

General Dynamics Assets Financed by Debt

The debt-to-assets ratio shows the degree to which General Dynamics 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.

General Dynamics Debt Ratio

    
  20.35   
It looks as if most of the General Dynamics' 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 General Dynamics' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of General Dynamics, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a General Dynamics debt ratio should be compared their industry average or other competing firms.
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General Dynamics Corporate Bonds Issued

General Dynamics issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. General Dynamics Corp uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most General bonds can be classified according to their maturity, which is the date when General Dynamics Corp has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.

General Dynamics Corp Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of General Dynamics, understanding its historical liability is critical in projecting General Dynamics' future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how General Dynamics uses its financing power over time.
In order to fund their growth, businesses such as General Dynamics widely use Financial Leverage. For most companies, financial capital is raised by issuing debt securities and by selling common stock. The debt and equity that make up General Dynamics' capital structure have many risks and return implications. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. Please note, 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.

Understaning General Dynamics Use of Financial Leverage

General Dynamics financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures General Dynamics'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 General Dynamics assets, the company is considered highly leveraged. Understanding the composition and structure of overall General Dynamics 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.
Last ReportedProjected for 2022
Total Debt11.5 B10 B
Debt CurrentB1.2 B
Debt Non Current10.5 BB
Issuance Repayment of Debt Securities-1.5 B-1.5 B
Long Term Debt to Equity 0.59  0.49 
Debt to Equity Ratio 1.84  2.17 
General Dynamics Corporation operates as an aerospace and defense company worldwide. General Dynamics Corporation was founded in 1899 and is headquartered in Reston, Virginia. General Dynamics operates under Aerospace Defense classification in the United States and is traded on New York Stock Exchange. It employs 103100 people.
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Please check the analysis of General Dynamics Fundamentals Over Time. Note that the General Dynamics Corp information on this page should be used as a complementary analysis to other General Dynamics' 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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Is General Dynamics' industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of General Dynamics. If investors know General will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about General Dynamics listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth YOY
0.052
Market Capitalization
59.6 B
Return On Assets
0.0543
Return On Equity
0.2
The market value of General Dynamics Corp is measured differently than its book value, which is the value of General that is recorded on the company's balance sheet. Investors also form their own opinion of General Dynamics' value that differs from its market value or its book value, called intrinsic value, which is General Dynamics' true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because General Dynamics' market value can be influenced by many factors that don't directly affect General Dynamics' underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between General Dynamics' value and its price as these two are different measures arrived at by different means. Investors typically determine General Dynamics value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, General Dynamics' 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.