Jerash Holdings Current Financial Leverage

JRSH Stock  USD 3.06  0.03  0.99%   
Jerash Holdings US holds a debt-to-equity ratio of 0.036. As of now, Jerash Holdings' Debt Equity Ratio is decreasing as compared to previous years. The Jerash Holdings' current Debt Ratio is estimated to increase to 0.02, while Net Debt is projected to decrease to (16.1 M). Jerash Holdings' financial risk is the risk to Jerash Holdings 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

Jerash Holdings' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Jerash Holdings' 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 Jerash Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Jerash Holdings' stakeholders.
For most companies, including Jerash Holdings, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Jerash Holdings US 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
0.5512
Book Value
5.543
Operating Margin
0.0137
Profit Margin
(0.01)
Return On Assets
0.0039
As of now, Jerash Holdings' Debt Equity Ratio is decreasing as compared to previous years. The Jerash Holdings' current Debt Ratio is estimated to increase to 0.02, while Net Debt is projected to decrease to (16.1 M).
  
Check out the analysis of Jerash Holdings Fundamentals Over Time.

Jerash Holdings Financial Leverage Rating

Jerash Holdings US bond ratings play a critical role in determining how much Jerash Holdings 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 Jerash Holdings' borrowing costs.

Jerash Holdings US Debt to Cash Allocation

As Jerash Holdings US follows its natural business cycle, the capital allocation decisions will not magically go away. Jerash Holdings' 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 768.75 K in liabilities with Debt to Equity (D/E) ratio of 0.04, which may suggest the company is not taking enough advantage from borrowing. Jerash Holdings US has a current ratio of 4.87, suggesting that it is liquid enough and is able to pay its financial obligations when due. Debt can assist Jerash Holdings until it has trouble settling it off, either with new capital or with free cash flow. So, Jerash Holdings' 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 Jerash Holdings US sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Jerash to invest in growth at high rates of return. When we think about Jerash Holdings' use of debt, we should always consider it together with cash and equity.

Jerash Holdings Total Assets Over Time

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

Jerash Net Debt

Net Debt

(16.1 Million)

As of now, Jerash Holdings' Net Debt is decreasing as compared to previous years.

Understaning Jerash Holdings Use of Financial Leverage

Jerash Holdings financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Jerash Holdings'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 Jerash Holdings assets, the company is considered highly leveraged. Understanding the composition and structure of overall Jerash Holdings 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 Jerash Holdings' 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 Jerash Holdings' 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 ReportedProjected for 2024
Net Debt-15.3 M-16.1 M
Short and Long Term Debt Total884.1 K1.2 M
Long Term Debt 0.00  0.00 
Short and Long Term Debt551.4 K448.4 K
Short Term Debt433.4 K543 K
Long Term Debt To Capitalization 0  0 
Total Debt To Capitalization 0.01  0.02 
Debt Equity Ratio 0.01  0.02 
Debt Ratio 0.01  0.02 
Cash Flow To Debt Ratio 12.65  13.28 
Please read more on our technical analysis page.

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When determining whether Jerash Holdings US offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Jerash Holdings' 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 Jerash Holdings Us Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Jerash Holdings Us Stock:
Check out the analysis of Jerash Holdings Fundamentals Over Time.
You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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When running Jerash Holdings' price analysis, check to measure Jerash Holdings' 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 Jerash Holdings is operating at the current time. Most of Jerash Holdings' value examination focuses on studying past and present price action to predict the probability of Jerash Holdings' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Jerash Holdings' price. Additionally, you may evaluate how the addition of Jerash Holdings to your portfolios can decrease your overall portfolio volatility.
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Is Jerash Holdings' 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 Jerash Holdings. If investors know Jerash 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 Jerash Holdings 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
(0.74)
Dividend Share
0.2
Earnings Share
(0.07)
Revenue Per Share
9.516
Quarterly Revenue Growth
(0.36)
The market value of Jerash Holdings US is measured differently than its book value, which is the value of Jerash that is recorded on the company's balance sheet. Investors also form their own opinion of Jerash Holdings' value that differs from its market value or its book value, called intrinsic value, which is Jerash Holdings' 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 Jerash Holdings' market value can be influenced by many factors that don't directly affect Jerash Holdings' 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 Jerash Holdings' value and its price as these two are different measures arrived at by different means. Investors typically determine if Jerash Holdings is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Jerash Holdings' 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.