1867 Western Current Debt
| WFCL Stock | USD 5,150 0.00 0.00% |
1867 Western's financial risk is the risk to 1867 Western stockholders that is caused by an increase in debt.
Given that 1867 Western'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 1867 Western 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 1867 Western to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, 1867 Western is said to be less leveraged. If creditors hold a majority of 1867 Western's assets, the Company is said to be highly leveraged.
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1867 Western Financial Leverage Rating
1867 Western Financial bond ratings play a critical role in determining how much 1867 Western 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 1867 Western's borrowing costs.1867 Western 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 1867 Western's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of 1867 Western, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a 1867 Western debt ratio should be compared their industry average or other competing firms.Understaning 1867 Western Use of Financial Leverage
1867 Western financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures 1867 Western'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 1867 Western assets, the company is considered highly leveraged. Understanding the composition and structure of overall 1867 Western 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 1867 Western'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 1867 Western'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).
1867 Western Financial Corporation operates as the bank holding company for Bank of Stockton that provides various banking products and services. Further, the company provides bill pay, ATM, online cash management, payroll direct deposit, payroll preparation, personnel reporting system, merchant, merchant BankCard acceptance, remote deposit, and automatic funds credit services and Internet, mobile, and telephone banking services. 1867 Western Financial Corporation was founded in 1867 and is based in Stockton, California. 1867 Western is traded on OTC Exchange in the United States. Please read more on our technical analysis page.
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Check out the analysis of 1867 Western Fundamentals Over Time. Note that the 1867 Western Financial information on this page should be used as a complementary analysis to other 1867 Western's 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Complementary Tools for 1867 Pink Sheet analysis
When running 1867 Western's price analysis, check to measure 1867 Western'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 1867 Western is operating at the current time. Most of 1867 Western's value examination focuses on studying past and present price action to predict the probability of 1867 Western's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move 1867 Western's price. Additionally, you may evaluate how the addition of 1867 Western to your portfolios can decrease your overall portfolio volatility.
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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.