ASX:CHZ Historical Debt Dec 11th 17
More Can CHZ meet its short-term obligations with the cash in hand? Given zero long-term debt on its balance sheet, Chesser Resources has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. At the current liabilities level of A$0.1M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of A$3.3M, with a current ratio of 24.35x. However, a ratio greater than 3x may be considered as too high, as CHZ could be holding too much capital in a low-return investment environment.
Next Steps: Are you a shareholder? CHZ’s soft top-line growth means not having any low-cost debt funding may not be optimal for the business. Shareholders should understand why the company isn’t opting for cheaper cost of capital to fund future growth, and whether the company needs financial flexibility at this point in time. You should take a look into a future growth analysis to properly assess what the market expects for the company moving forward.
Are you a potential investor? CHZ’s health in terms of financial liquidity should ease potential investors’ concerns. Though, a relatively low revenue growth could hurt returns, meaning there is some benefit to looking at low-cost funding alternatives. I admit this is a fairly basic analysis for CHZ’s financial health. Other important fundamentals need to be considered alongside. For your next step, you should take a look at CHZ’s past performance in order to determine for yourself whether its zero-debt position is justified.
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.