LQ BARR Current Financial Leverage

LQ BARR'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. LQ BARR's financial risk is the risk to LQ BARR 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).
Check out Your Equity Center.
  
Given that LQ BARR'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 LQ BARR 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 LQ BARR to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, LQ BARR is said to be less leveraged. If creditors hold a majority of LQ BARR's assets, the company is said to be highly leveraged.

LQ BARR Financial Leverage Rating

LQ BARR EXP bond ratings play a critical role in determining how much LQ BARR 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 LQ BARR's borrowing costs.

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

Be your own money manager

Our tools can tell you how much better you can do entering a position in LQ BARR without increasing your portfolio risk or giving up the expected return. As an individual investor, you need to find a reliable way to track all your investment portfolios. However, your requirements will often be based on how much of the process you decide to do yourself. In addition to allowing all investors analytical transparency into all their portfolios, our tools can evaluate risk-adjusted returns of your individual positions relative to your overall portfolio.

Did you try this?

Run Portfolio Manager Now

   

Portfolio Manager

State of the art Portfolio Manager to monitor and improve performance of your invested capital
All  Next Launch Module

Currently Active Assets on Macroaxis

Check out Your Equity Center. Note that the LQ BARR EXP information on this page should be used as a complementary analysis to other LQ BARR'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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

Other Tools for Q00277 Stock

When running LQ BARR EXP price analysis, check to measure LQ BARR'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 LQ BARR is operating at the current time. Most of LQ BARR's value examination focuses on studying past and present price action to predict the probability of LQ BARR's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move LQ BARR's price. Additionally, you may evaluate how the addition of LQ BARR to your portfolios can decrease your overall portfolio volatility.
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Go
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go
Global Correlations
Find global opportunities by holding instruments from different markets
Go
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Go
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Go
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Go
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go

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.