Does Zero-Debt Make St George Mining Limited (ASX:SGQ) A Financially Strong Company?

Can SGQ pay its short-term liabilities?

Given zero long-term debt on its balance sheet, St George Mining 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 AU$2.25M liabilities, it appears that the company has been able to meet these commitments with a current assets level of AU$5.03M, leading to a 2.23x current account ratio. Usually, for Metals and Mining companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

Next Steps:

SGQ is a fast-growing firm, which supports having have zero-debt and financial freedom to continue to ramp up growth. Since there is also no concerns around SGQ’s liquidity needs, this may be its optimal capital structure for the time being. Moving forward, its financial position may be different. I admit this is a fairly basic analysis for SGQ’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research St George Mining to get a better picture of the stock by looking at:

1. Historical Performance: What has SGQ’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.