Affirm Holdings Corporate Bonds and Leverage Analysis
| AFRM Stock | USD 38.44 1.20 3.03% |
Affirm Holdings holds a debt-to-equity ratio of 1.582. At this time, Affirm Holdings' Long Term Debt To Capitalization is very stable compared to the past year. As of the 7th of September 2024, Total Debt To Capitalization is likely to grow to 0.91, while Short Term Debt is likely to drop about 286.2 M. . Affirm Holdings' financial risk is the risk to Affirm Holdings stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Affirm 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. Affirm 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 Affirm Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Affirm Holdings' stakeholders.
For most companies, including Affirm Holdings, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Affirm Holdings, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Affirm Holdings' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 4.3832 | Book Value 8.783 | Operating Margin (0.11) | Profit Margin (0.22) | Return On Assets (0.04) |
Affirm |
Given the importance of Affirm Holdings' capital structure, the first step in the capital decision process is for the management of Affirm Holdings to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Affirm Holdings to issue bonds at a reasonable cost.
Affirm Holdings Debt to Cash Allocation
Many companies such as Affirm Holdings, 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.
Affirm Holdings currently holds 6.45 B in liabilities with Debt to Equity (D/E) ratio of 1.58, which is about average as compared to similar companies. Affirm Holdings has a current ratio of 19.09, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Affirm Holdings' use of debt, we should always consider it together with its cash and equity.Affirm Holdings Total Assets Over Time
Affirm Holdings Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Affirm Holdings uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.Affirm Holdings Debt Ratio | 86.0 |
Affirm Holdings Corporate Bonds Issued
Affirm Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Affirm Holdings Use of Financial Leverage
Leverage ratios show Affirm Holdings' total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Affirm Holdings' financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 6.5 B | 3.6 B | |
| Net Debt | 5.2 B | 5.4 B | |
| Long Term Debt | 6.6 B | 6.9 B | |
| Short Term Debt | 345.7 M | 286.2 M | |
| Long Term Debt Total | 4.1 B | 3.8 B | |
| Net Debt To EBITDA | 59.74 | 62.73 | |
| Debt To Equity | 2.35 | 2.47 | |
| Interest Debt Per Share | 21.87 | 22.96 | |
| Debt To Assets | 0.68 | 0.86 | |
| Long Term Debt To Capitalization | 0.69 | 1.08 | |
| Total Debt To Capitalization | 0.70 | 0.91 | |
| Debt Equity Ratio | 2.35 | 2.47 | |
| Debt Ratio | 0.68 | 0.86 | |
| Cash Flow To Debt Ratio | 0.07 | 0.07 |
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When determining whether Affirm Holdings is a strong investment it is important to analyze Affirm Holdings' competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Affirm Holdings' future performance. For an informed investment choice regarding Affirm Stock, refer to the following important reports:Check out the analysis of Affirm Holdings Fundamentals Over Time. To learn how to invest in Affirm Stock, please use our How to Invest in Affirm Holdings guide.You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Is Data Processing & Outsourced Services space 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 Affirm Holdings. If investors know Affirm 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 Affirm Holdings listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Earnings Share (1.67) | Revenue Per Share 7.497 | Quarterly Revenue Growth 0.479 | Return On Assets (0.04) | Return On Equity (0.20) |
The market value of Affirm Holdings is measured differently than its book value, which is the value of Affirm that is recorded on the company's balance sheet. Investors also form their own opinion of Affirm Holdings' value that differs from its market value or its book value, called intrinsic value, which is Affirm 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 Affirm Holdings' market value can be influenced by many factors that don't directly affect Affirm 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 Affirm Holdings' value and its price as these two are different measures arrived at by different means. Investors typically determine if Affirm Holdings is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Affirm 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.