Circle Entertainment Current Financial Leverage

CEXEDelisted Stock  USD 0  0.00  0.00%   
Circle Entertainment holds a debt-to-equity ratio of -1.028. Circle Entertainment's financial risk is the risk to Circle Entertainment 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).
Given that Circle Entertainment'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 Circle Entertainment 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 Circle Entertainment to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Circle Entertainment is said to be less leveraged. If creditors hold a majority of Circle Entertainment's assets, the Company is said to be highly leveraged.
  
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Circle Entertainment Financial Leverage Rating

Circle Entertainment bond ratings play a critical role in determining how much Circle Entertainment 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 Circle Entertainment's borrowing costs.

Circle Entertainment Debt to Cash Allocation

As Circle Entertainment follows its natural business cycle, the capital allocation decisions will not magically go away. Circle Entertainment'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 currently holds 11.08 M in liabilities. Circle Entertainment has a current ratio of 0.01, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Debt can assist Circle Entertainment until it has trouble settling it off, either with new capital or with free cash flow. So, Circle Entertainment'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 Circle Entertainment sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Circle to invest in growth at high rates of return. When we think about Circle Entertainment's use of debt, we should always consider it together with cash and equity.

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

Understaning Circle Entertainment Use of Financial Leverage

Circle Entertainment financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Circle Entertainment'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 Circle Entertainment assets, the company is considered highly leveraged. Understanding the composition and structure of overall Circle Entertainment 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 Circle Entertainment'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 Circle Entertainment'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).
Circle Entertainment, Inc. does not have significant operations. Circle Entertainment Inc. was founded in 2007 and is based in New York, New York. CIRCLE ENTERTAINMENT is traded on PNK Exchange in the United States.
Please read more on our technical analysis page.
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 Circle Entertainment 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, Circle Entertainment's short interest history, or implied volatility extrapolated from Circle Entertainment options trading.

Pair Trading with Circle Entertainment

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Circle Entertainment position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Circle Entertainment will appreciate offsetting losses from the drop in the long position's value.
The ability to find closely correlated positions to Circle Entertainment could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Circle Entertainment when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Circle Entertainment - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Circle Entertainment to buy it.
The correlation of Circle Entertainment is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Circle Entertainment moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Circle Entertainment moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Circle Entertainment can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
Check out Trending Equities to better understand how to build diversified portfolios. Also, note that the market value of any company could be tightly coupled with the direction of predictive economic indicators such as signals in interest.
You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

Other Consideration for investing in Circle Pink Sheet

If you are still planning to invest in Circle Entertainment check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Circle Entertainment's history and understand the potential risks before investing.
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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.
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.