ASX:NKP Historical Debt Dec 7th 17
Does NKP’s liquid assets cover its short-term commitments?
Given zero long-term debt on its balance sheet, Nkwe Platinum has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. With current liabilities at A$0.3M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of A$6.1M, with a current ratio of 19.22x. Though, a ratio greater than 3x may be considered as too high, as NKP could be holding too much capital in a low-return investment environment.
Next Steps:
Are you a shareholder? Having no debt on the books means NKP has more financial freedom to keep growing at its current fast rate. Since there is also no concerns around NKP’s liquidity needs, this may be its optimal capital structure for the time being. Moving forward, its financial position may change. I suggest researching market expectations for NKP’s future growth.
Are you a potential investor? NKP’s high growth makes financial flexibility an attractive option. Furthermore, its high liquidity means the company should continue to operate smoothly in the case of adverse events. In order to build your confidence in the stock, you need to also analyse the company’s track record. I encourage you to continue your research by taking a look at NKP’s past performance to conclude on NKP’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.