ASX:BOC Historical Debt Jan 7th 18
Can BOC pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Bougainville Copper 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 PGK15.5M liabilities, it appears that the company has been able to meet these commitments with a current assets level of PGK19.6M, leading to a 1.26x current account ratio. Usually, for metals and mining companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Next Steps:
Are you a shareholder? Having no debt on the books means BOC has more financial freedom to keep growing at its current fast rate. However, the company’s low liquidity lowers our confidence around meeting near-term commitments. Some level of low-cost debt funding could help address these needs. ] %} Going forward, its financial position may change. I suggest keeping on top of market expectations for BOC’s future growth.
Are you a potential investor? BOC’s high growth makes financial flexibility an attractive option. Although, in the event of adversity, the company may struggle to meet its short-term obligations due to its low liquidity in assets. I encourage you to continue your research by taking a look at BOC’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.