Biogen Debt
| IDP Stock | EUR 199.75 1.05 0.52% |
Biogen Inc holds a debt-to-equity ratio of 0.717. Biogen's financial risk is the risk to Biogen stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Biogen'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. Biogen'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 Biogen Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Biogen's stakeholders.
For most companies, including Biogen, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Biogen Inc 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.
Given that Biogen'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 Biogen 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 Biogen to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Biogen is said to be less leveraged. If creditors hold a majority of Biogen's assets, the Company is said to be highly leveraged.
Biogen |
Biogen Bond Ratings
Biogen Inc bond ratings play a critical role in determining how much Biogen 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 Biogen's borrowing costs.Biogen Inc Debt to Cash Allocation
As Biogen Inc follows its natural business cycle, the capital allocation decisions will not magically go away. Biogen'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 6.28 B in total debt with debt to equity ratio (D/E) of 0.72, which is about average as compared to similar companies. Biogen Inc has a current ratio of 2.08, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist Biogen until it has trouble settling it off, either with new capital or with free cash flow. So, Biogen'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 Biogen Inc sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Biogen to invest in growth at high rates of return. When we think about Biogen's use of debt, we should always consider it together with cash and equity.Biogen 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 Biogen's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Biogen, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Biogen debt ratio should be compared their industry average or other competing firms.Biogen Corporate Bonds Issued
Biogen 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. Biogen Inc 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 Biogen bonds can be classified according to their maturity, which is the date when Biogen Inc 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.
Understaning Biogen Use of Financial Leverage
Biogen financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Biogen'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 Biogen assets, the company is considered highly leveraged. Understanding the composition and structure of overall Biogen 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. Financial leverage can amplify the potential profits to Biogen's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Biogen's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Biogen Inc. discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases worldwide. The company was founded in 1978 and is headquartered in Cambridge, Massachusetts. BIOGEN INC operates under Drug ManufacturersGeneral classification in Germany and is traded on Frankfurt Stock Exchange. It employs 9100 people. Please read more on our technical analysis page.
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When determining whether Biogen Inc offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Biogen'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 Biogen Inc Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Biogen Inc Stock:Check out the analysis of Biogen Fundamentals Over Time. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Complementary Tools for Biogen Stock analysis
When running Biogen's price analysis, check to measure Biogen'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 Biogen is operating at the current time. Most of Biogen's value examination focuses on studying past and present price action to predict the probability of Biogen's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Biogen's price. Additionally, you may evaluate how the addition of Biogen to your portfolios can decrease your overall portfolio volatility.
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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.