The following basic checks can help you get a picture of the company’s balance sheet strength. CLI has sustained its debt level by about UK£842m over the last 12 months including long-term debt. At this constant level of debt, CLI currently has UK£100m remaining in cash and short-term investments , ready to be used for running the business. Looking at CLI’s UK£170m in current liabilities, it seems that the business has been able to meet these obligations given the level of current assets of UK£173m, with a current ratio of 1.02x.
The current ratio is calculated by dividing current assets by current liabilities. Usually, for Real Estate companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment. With a debt-to-equity ratio of 75%, CLI can be considered as an above-average leveraged company. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies.
No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings before interest and tax at least three times its net interest payments is considered financially sound. This is only a rough assessment of financial health, and I’m sure CLI has company-specific issues impacting its capital structure decisions. We aim to bring you long-term focused research analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. If you spot an error that warrants correction, please contact the editor at . It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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