underleveraged


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Underleveraged

Describing a company with too little debt. While it sounds strange, a company may be underleveraged because interest on bonds are usually tax deductible for the issuing company; thus, a bond issue can create higher earnings per share for stockholders. There is no metric for determining when a company is underleveraged and investors decide on it based on their personal perceptions.

underleveraged

Of, relating to, or being a firm that has insufficient debt in its capital structure. Because bond interest is deductible for tax purposes and is generally fixed in amount for a long period of time, some use of debt can often result in greater earnings per share for stockholders. Determining whether a company is underleveraged is usually a matter of opinion.
References in periodicals archive ?
It is unclear whether the increase in leverage for underleveraged firms comes from changes in debt or equity.
We remain prudent in our management of risk and have built up a strong liquidity position and an underleveraged balance sheet while also continuing to invest in key global markets on an opportunistic basis.
"I believe that design is one of the most underleveraged tools in U.S.
These measures should start to stimulate borrowing in the short run -- something urgentlyrequired in an underleveraged economy.
"It is one of the strongest and yet most underleveraged brands." Formerly a top marketing executive in the Anil Dhirubhai Ambani Group (ADAG) involved with Reliance DTH, Reliance Communications and Reliance BIG Entertainment - and before that with Hindustan Unilever and Nokia - he began by overhauling the company's structure.
The concept at work here is conversion--converting goods into services and converting underleveraged service assets into more valuable ones.
For example, De Haas and Peeters (2006) notice divergent results for the smallest and largest firms: the first have gradually become slightly underleveraged while the latter have become less underleveraged during the research period (1993-2001).
Still, South Asia s share of the global economy remains strikingly low relative to its share of the world s urban population, and, in general, urbanization in the region remains underleveraged. The share of the region s population officially classified as living in urban settlements increased only marginally from 27.4 percent in 2000 to 30.9 percent in 2011.
In a situation when the company in underleveraged, managers could be motivated to additionally increase debt in order to rebalance the cost of financing distress and benefits of interest tax shields.
UNB shares have risen a stellar 17 per cent in the past three months but the bank has an underleveraged balance sheet, significant potential for accelerated loan growth, cost restructuring and a higher dividend payout.
It is now entirely possible that MLP's with "fortress", underleveraged balance sheets will accelerate growth via takeover bids, as the interest rate cost of project finance is still benign.
Yet it continues to be confounding that multicultured opportunities remain underleveraged and underfinanced in targeted and total market platforms.