1933 Industries Current Financial Leverage

TGIFF Stock  USD 0.01  0  11.11%   
1933 Industries holds a debt-to-equity ratio of 1.604. 1933 Industries' financial risk is the risk to 1933 Industries 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

1933 Industries' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. 1933 Industries' cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the OTC Stock is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps 1933 OTC Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect 1933 Industries' stakeholders.
For most companies, including 1933 Industries, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running 1933 Industries 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 1933 Industries' debt-to-equity ratio measures a OTC Stock's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which 1933 Industries 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 1933 Industries to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, 1933 Industries is said to be less leveraged. If creditors hold a majority of 1933 Industries' assets, the OTC Stock is said to be highly leveraged.
  
Check out the analysis of 1933 Industries Fundamentals Over Time.

1933 Industries Financial Leverage Rating

1933 Industries bond ratings play a critical role in determining how much 1933 Industries 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 1933 Industries' borrowing costs.

1933 Industries Debt to Cash Allocation

As 1933 Industries follows its natural business cycle, the capital allocation decisions will not magically go away. 1933 Industries' 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 18.09 M in total debt with debt to equity ratio (D/E) of 1.6, which is about average as compared to similar companies. 1933 Industries has a current ratio of 1.33, which is within standard range for the sector. Debt can assist 1933 Industries until it has trouble settling it off, either with new capital or with free cash flow. So, 1933 Industries' 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 1933 Industries sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for 1933 to invest in growth at high rates of return. When we think about 1933 Industries' use of debt, we should always consider it together with cash and equity.

1933 Industries 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 1933 Industries' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of 1933 Industries, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a 1933 Industries debt ratio should be compared their industry average or other competing firms.

Understaning 1933 Industries Use of Financial Leverage

1933 Industries financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures 1933 Industries'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 1933 Industries assets, the company is considered highly leveraged. Understanding the composition and structure of overall 1933 Industries 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 1933 Industries' 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 1933 Industries' 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).
1933 Industries Inc., a cannabis company, engages in the cultivation and production of medical marijuana in the United States and Canada. The company was formerly known as Friday Night Inc. and changed its name to 1933 Industries Inc. in September 2018. Friday Night is traded on OTC Exchange in the United States.
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Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards 1933 Industries in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, 1933 Industries' short interest history, or implied volatility extrapolated from 1933 Industries options trading.

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Check out the analysis of 1933 Industries Fundamentals Over Time.
Note that the 1933 Industries information on this page should be used as a complementary analysis to other 1933 Industries' 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 the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

Complementary Tools for 1933 OTC Stock analysis

When running 1933 Industries' price analysis, check to measure 1933 Industries' 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 1933 Industries is operating at the current time. Most of 1933 Industries' value examination focuses on studying past and present price action to predict the probability of 1933 Industries' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move 1933 Industries' price. Additionally, you may evaluate how the addition of 1933 Industries to your portfolios can decrease your overall portfolio volatility.
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Please note, there is a significant difference between 1933 Industries' value and its price as these two are different measures arrived at by different means. Investors typically determine if 1933 Industries is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, 1933 Industries' 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.