Is Train Alliance Sweden (STO:TRAIN B) Using Too Much Debt?
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March 04, 2021 David Iben put it well when he said, Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital. It s only natural to consider a company s balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly,
Train Alliance Sweden AB (publ) (STO:TRAIN B) does carry debt. But the more important question is: how much risk is that debt creating? Why Does Debt Bring Risk? Generally speaking, debt only becomes a real problem when a company can t easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses,