Ingersoll Rand Current Financial Leverage
| IR Stock | USD 92.50 1.93 2.13% |
Ingersoll Rand holds a debt-to-equity ratio of 0.318. At this time, Ingersoll Rand's Long Term Debt is relatively stable compared to the past year. As of 04/24/2024, Short and Long Term Debt Total is likely to grow to about 2.9 B, while Short Term Debt is likely to drop slightly above 29.1 M. Ingersoll Rand's financial risk is the risk to Ingersoll Rand 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).
Asset vs Debt
Equity vs Debt
Ingersoll Rand'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. Ingersoll Rand'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 Ingersoll Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Ingersoll Rand's stakeholders.
Ingersoll Rand Quarterly Net Debt |
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For most companies, including Ingersoll Rand, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Ingersoll Rand 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 3.7903 | Book Value 24.257 | Operating Margin 0.1985 | Profit Margin 0.1132 | Return On Assets 0.0512 |
Given that Ingersoll Rand'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 Ingersoll Rand 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 Ingersoll Rand to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Ingersoll Rand is said to be less leveraged. If creditors hold a majority of Ingersoll Rand's assets, the Company is said to be highly leveraged.
At this time, Ingersoll Rand's Long Term Debt is relatively stable compared to the past year. As of 04/24/2024, Short and Long Term Debt Total is likely to grow to about 2.9 B, while Short Term Debt is likely to drop slightly above 29.1 M. Ingersoll |
Ingersoll Rand Financial Leverage Rating
Ingersoll Rand bond ratings play a critical role in determining how much Ingersoll Rand 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 Ingersoll Rand's borrowing costs.| Piotroski F Score | 7 Strong |
| Beneish M Score | -3.41 Unlikely Manipulator |
Ingersoll Rand Debt to Cash Allocation
As Ingersoll Rand follows its natural business cycle, the capital allocation decisions will not magically go away. Ingersoll Rand'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 reports 2.72 B of total liabilities with total debt to equity ratio (D/E) of 0.32, which is normal for its line of buisiness. Ingersoll Rand has a current ratio of 2.38, indicating that it is in good position to pay out its debt commitments in time. Debt can assist Ingersoll Rand until it has trouble settling it off, either with new capital or with free cash flow. So, Ingersoll Rand'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 Ingersoll Rand sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Ingersoll to invest in growth at high rates of return. When we think about Ingersoll Rand's use of debt, we should always consider it together with cash and equity.Ingersoll Rand Total Assets Over Time
Ingersoll Rand 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 Ingersoll Rand's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Ingersoll Rand, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a an Ingersoll Rand debt ratio should be compared their industry average or other competing firms.Ingersoll Long Term Debt
Long Term Debt |
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Understaning Ingersoll Rand Use of Financial Leverage
Ingersoll Rand financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Ingersoll Rand'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 Ingersoll Rand assets, the company is considered highly leveraged. Understanding the composition and structure of overall Ingersoll Rand 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 Ingersoll Rand'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 Ingersoll Rand'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).
| Last Reported | Projected for Next Year | ||
| Long Term Debt | 2.7 B | 3.1 B | |
| Long Term Debt Total | 4.4 B | 3.9 B | |
| Short Term Debt | 30.6 M | 29.1 M | |
| Short and Long Term Debt | 30.6 M | 29.1 M | |
| Short and Long Term Debt Total | 2.7 B | 2.9 B | |
| Net Debt | 1.1 B | 1.3 B | |
| Net Debt To EBITDA | 0.69 | 0.66 | |
| Debt To Equity | 0.28 | 0.26 | |
| Interest Debt Per Share | 7.12 | 11.42 | |
| Debt To Assets | 0.17 | 0.17 | |
| Long Term Debt To Capitalization | 0.22 | 0.21 | |
| Total Debt To Capitalization | 0.22 | 0.21 | |
| Debt Equity Ratio | 0.28 | 0.26 | |
| Debt Ratio | 0.17 | 0.17 | |
| Cash Flow To Debt Ratio | 0.51 | 0.53 |
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When running Ingersoll Rand's price analysis, check to measure Ingersoll Rand'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 Ingersoll Rand is operating at the current time. Most of Ingersoll Rand's value examination focuses on studying past and present price action to predict the probability of Ingersoll Rand's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Ingersoll Rand's price. Additionally, you may evaluate how the addition of Ingersoll Rand to your portfolios can decrease your overall portfolio volatility.
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Is Ingersoll Rand'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 Ingersoll Rand. If investors know Ingersoll 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 Ingersoll Rand 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 0.046 | Dividend Share 0.08 | Earnings Share 1.9 | Revenue Per Share 16.986 | Quarterly Revenue Growth 0.122 |
The market value of Ingersoll Rand is measured differently than its book value, which is the value of Ingersoll that is recorded on the company's balance sheet. Investors also form their own opinion of Ingersoll Rand's value that differs from its market value or its book value, called intrinsic value, which is Ingersoll Rand'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 Ingersoll Rand's market value can be influenced by many factors that don't directly affect Ingersoll Rand'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 Ingersoll Rand's value and its price as these two are different measures arrived at by different means. Investors typically determine if Ingersoll Rand is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Ingersoll Rand'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.