ASX:AVD Historical Debt Dec 21st 17
Does AVD’s liquid assets cover its short-term commitments?
Given zero long-term debt on its balance sheet, Antilles Oil and Gas 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. At the current liabilities level of A$0.2M liabilities, the company has been able to meet these obligations given the level of current assets of A$3.1M, with a current ratio of 19.65x. Though, anything about 3x may be excessive, since AVD may be leaving too much capital in low-earning investments.
Next Steps:
Are you a shareholder? Given that Antilles Oil and Gas is a relatively low-growth company, being in a zero-debt position isn’t always optimal. Shareholders should understand why the company isn’t opting for cheaper cost of capital to fund future growth, and why financial flexibility is needed at this stage in its business cycle. I suggest you take a look into a future growth analysis to properly assess the company’s position.
Are you a potential investor? AVD’s financial health in terms of its liquidity shouldn’t be a concern for potential investors. However, its soft revenue growth means there’s potential to improve return on capital by taking on some debt and ramp up growth. Keep in mind I haven’t considered other factors such as how AVD has been performing in the past. I encourage you to continue your research by taking a look at AVD’s past performance to figure out AVD’s financial health position.
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.