ASX:MZM Historical Debt Jan 7th 18
Can MZM pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Montezuma Mining 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$0.2M liabilities, it appears that the company has been able to meet these commitments with a current assets level of A$11.5M, leading to a 53.79x current account ratio. However, anything above 3x is considered high and could mean that MZM has too much idle capital in low-earning investments.
Next Steps:
Are you a shareholder? MZM’s soft top-line growth means being in a zero-debt position isn’t always optimal. As an investor, you may want to figure out if there are company-specific reasons for not having any debt, and why financial flexibility is needed at this stage in its business cycle. I recommend taking a look into a future growth analysis to properly assess the company’s position.
Are you a potential investor? In terms of meeting is short term obligations, there’s nothing to worry about for MZM. However, its low sales 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 MZM’s financial health. Other important fundamentals need to be considered alongside. You should continue your analysis by taking a look at MZM’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.