Park City Current Financial Leverage

PCYG
 Stock
  

USD 4.45  0.05  1.14%   

Park City'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. Park City's financial risk is the risk to Park City 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 Park City Fundamentals Over Time.
  
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Park City Issuance Repayment of Debt Securities is projected to based on the last few years of reporting. The past year's Issuance Repayment of Debt Securities was at 995,172. The current year Long Term Debt to Equity is expected to grow to 0.0344, whereas Total Debt is forecasted to decline to about 4.6 M.

Park City Current Financial Burden

Park City'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. Park City'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 Park City Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Park City's stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Park City, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Park City Group 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
1.98
Book Value
2.3
Operating Margin
0.25
Profit Margin
0.23
Return On Assets
0.0526
Return On Equity
0.0929
Given the importance of Park City's capital structure, the first step in the capital decision process is for the management of Park City 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 Park City Group to issue bonds at a reasonable cost.

Park City Financial Leverage Rating

Park City Group bond ratings play a critical role in determining how much Park City 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 Park City's borrowing costs.
Piotroski F Score
6  Healthy
Beneish M Score

Park City Group Debt to Cash Allocation

As Park City Group follows its natural business cycle, the capital allocation decisions will not magically go away. Park City'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 currently holds 1.58 M in liabilities with Debt to Equity (D/E) ratio of 0.03, which may suggest the company is not taking enough advantage from borrowing. Park City Group has a current ratio of 6.24, suggesting that it is liquid enough and is able to pay its financial obligations when due. Debt can assist Park City until it has trouble settling it off, either with new capital or with free cash flow. So, Park City'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 Park City Group sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Park City to invest in growth at high rates of return. When we think about Park City's use of debt, we should always consider it together with cash and equity.

Park City Receivables Over Time

Park City Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Park City 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.

Park City Debt Ratio

    
  11.45   
It looks as if most of the Park City's 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 Park City's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Park City, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Park City debt ratio should be compared their industry average or other competing firms.
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Park City Group Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Park City, understanding its historical liability is critical in projecting Park City's 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 Park City uses its financing power over time.
In order to fund their growth, businesses such as Park City 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 Park City's 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 Park City Use of Financial Leverage

Park City financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Park City'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 Park City assets, the company is considered highly leveraged. Understanding the composition and structure of overall Park City 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 Debt5.3 M4.6 M
Debt Current5.7 M4.6 M
Debt Non Current828.7 K1.1 M
Issuance Repayment of Debt Securities995.2 K1.1 M
Long Term Debt to Equity 0.0335  0.0344 
Debt to Equity Ratio 0.15  0.15 
Park City Group, Inc., a software-as-a-service provider, designs, develops, and markets proprietary software products in North America. It primarily serves multi-store retail chains, wholesalers and distributors, and their suppliers. Park City operates under SoftwareApplication classification in the United States and is traded on NASDAQ Exchange. It employs 70 people.
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Please check the analysis of Park City Fundamentals Over Time. Note that the Park City Group information on this page should be used as a complementary analysis to other Park City'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 Shere Portfolio module to track or share privately all of your investments from the convenience of any device.

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Is Park City's 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 Park City. If investors know Park City 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 Park City 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
0.65
Market Capitalization
81.8 M
Quarterly Revenue Growth YOY
-0.24
Return On Assets
0.0526
Return On Equity
0.0929
The market value of Park City Group is measured differently than its book value, which is the value of Park City that is recorded on the company's balance sheet. Investors also form their own opinion of Park City's value that differs from its market value or its book value, called intrinsic value, which is Park City's 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 Park City's market value can be influenced by many factors that don't directly affect Park City's 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 Park City's value and its price as these two are different measures arrived at by different means. Investors typically determine Park City value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Park City'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.