ASX:RTR Historical Debt Dec 13th 17
Can RTR pay its short-term liabilities?
Since Rumble Resources doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term 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$1.3M liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.26x. Generally, for metals and mining companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Next Steps:
Are you a shareholder? Given that Rumble Resources is a relatively low-growth company, being in a zero-debt position isn’t always optimal. As shareholders, you should try and determine whether this strategy is justified for RTR, 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? RTR’s financial health in terms of its liquidity shouldn’t be a concern for potential investors. Though, a relatively low revenue growth could hurt returns, meaning there is some benefit to looking at low-cost funding alternatives. Keep in mind I haven’t considered other factors such as how RTR has been performing in the past. For your next step, you should take a look at RTR’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.