Tejon Ranch Debt
| TRC Stock | USD 16.14 0.52 3.12% |
Tejon Ranch holds a debt-to-equity ratio of 0.109. With a high degree of financial leverage come high-interest payments, which usually reduce Tejon Ranch's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Tejon Ranch's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Tejon Ranch's 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 Tejon Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Tejon Ranch's stakeholders.
For most companies, including Tejon Ranch, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Tejon Ranch Co, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Tejon Ranch's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Tejon Ranch'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 Tejon Ranch 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 Tejon Ranch to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Tejon Ranch is said to be less leveraged. If creditors hold a majority of Tejon Ranch's assets, the Company is said to be highly leveraged.
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Tejon Ranch Debt to Cash Allocation
As Tejon Ranch Co follows its natural business cycle, the capital allocation decisions will not magically go away. Tejon Ranch'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.
Tejon Ranch Co has 47.94 M in debt with debt to equity (D/E) ratio of 0.11, which may show that the company is not taking advantage of profits from borrowing. Tejon Ranch has a current ratio of 5.02, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Note however, debt could still be an excellent tool for Tejon to invest in growth at high rates of return. Tejon Ranch 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 Tejon Ranch's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Tejon Ranch, which in turn will lower the firm's financial flexibility.Tejon Ranch Corporate Bonds Issued
Most Tejon bonds can be classified according to their maturity, which is the date when Tejon Ranch Co has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Understaning Tejon Ranch Use of Financial Leverage
Tejon Ranch's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Tejon Ranch's total debt position, including all outstanding debt obligations, and compares it with Tejon Ranch's equity. Financial leverage can amplify the potential profits to Tejon Ranch's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Tejon Ranch is unable to cover its debt costs.
Tejon Ranch Co., together with its subsidiaries, operates as a diversified real estate development and agribusiness company. Tejon Ranch Co. was founded in 1843 and is based in Lebec, California. Tejon Ranch operates under Conglomerates classification in the United States and is traded on New York Stock Exchange. It employs 90 people. Please read more on our technical analysis page.
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Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.When determining whether Tejon Ranch offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Tejon Ranch's 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 Tejon Ranch Co Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Tejon Ranch Co Stock:Check out the analysis of Tejon Ranch Fundamentals Over Time. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Is Multi-Family Residential REITs 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 Tejon Ranch. If investors know Tejon 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 Tejon Ranch listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Tejon Ranch is measured differently than its book value, which is the value of Tejon that is recorded on the company's balance sheet. Investors also form their own opinion of Tejon Ranch's value that differs from its market value or its book value, called intrinsic value, which is Tejon Ranch's 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 Tejon Ranch's market value can be influenced by many factors that don't directly affect Tejon Ranch's 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 Tejon Ranch's value and its price as these two are different measures arrived at by different means. Investors typically determine if Tejon Ranch is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Tejon Ranch's 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.