ASX:LIO Historical Debt Jan 31st 18
Can LIO pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Lion Energy 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 $0.9M liabilities, the company has been able to meet these commitments with a current assets level of $2.3M, leading to a 2.59x current account ratio. Generally, for Oil and Gas 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:
Given that Lion Energy is a relatively low-growth company, not taking advantage of lower cost debt may not be the best strategy. As an investor, you may want to figure out if there are company-specific reasons for not having any debt, and whether the company needs financial flexibility at this point in time. This is only a rough assessment of financial health, and I’m sure LIO has company-specific issues impacting its capital structure decisions. I suggest you continue to research Lion Energy to get a better picture of the stock by looking at:
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.