TSXV:BCK Historical Debt Nov 9th 17
More While failure to manage cash has been one of the major reasons behind the demise of a lot of small businesses, mismanagement comes into the light during tough situations such as an economic recession. Furthermore, failure to service debt can hurt its reputation, making funding expensive in the future. Can BCK pay off what it owes to its debtholder by using only cash from its operational activities? Last year, BCK’s operating cash flow was -0.97x its current debt. This means what BCK can generate on an annual basis, which is currently a negative value, does not cover what it actually owes its debtors in the near term. This raises a red flag, looking at BCK’s operations at this point in time.
Can BCK meet its short-term obligations with the cash in hand? What about its other commitments such as payments to suppliers and salaries to its employees? During times of unfavourable events, BCK could be required to liquidate some of its assets to meet these upcoming payments, as cash flow from operations is hindered. We test for BCK’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that BCK is unable to meet all of its upcoming commitments with its cash and other short-term assets. While this is not abnormal for companies, as their cash is better invested in the business or returned to investors than lying around, it does bring about some concerns should any unfavourable circumstances arise.
Is BCK’s level of debt at an acceptable level? While ideally the debt-to equity ratio of a financially healthy company should be less than 40%, several factors such as industry life-cycle and economic conditions can result in a company raising a significant amount of debt. In the case of BCK, the debt-to-equity ratio is 14.61%, which means its risk of facing a debt-overhang is very low.
Next Steps: Are you a shareholder? Although BCK’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. In addition to this, the company may not be able to pay all of its upcoming liabilities from its current short-term assets. Given that its financial position may be different. I suggest keeping on top of market expectations for BCK’s future growth on our free analysis platform .
Are you a potential investor? BCK appears to have maintained a sensible level of debt, meaning there’s some room to take on more debt if needed. But its current cash flow coverage of existing debt, in addition to the low liquidity, is concerning. However, keep in mind that this is a point-in-time analysis, and today’s performance may not be representative of BCK’s track record. You should continue your analysis by taking a look at BCK’s past performance analysis on our free platform to conclude on BCK’s financial health.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements. The author is an independent contributor and at the time of publication had no position in the stocks mentioned.