What You Need to Know About Coca-Cola Amatil Limited's Financial Strength (ASX: CCL) – Simply Wall St News

Investors are still seeking small cap stocks such as Coca-Cola Amatil Limited (ASX: CCL) with a market capitalization of A $ 6.3 billion. However, an important fact that most people do not know is: what is the financial health of the business?
Evaluate first and foremost the financial health is
essential,
because mismanagement of capital can lead to bankruptcies,
that occur at a higher rate for small caps.
The following basic controls can help you get a picture of the strength of the company's balance sheet.
however,
this is just a partial view of the stock, and
I suggest you
dig deeper into CCL here.

Debt (and cash flow) of CCL

CCL has maintained its debt level of about 2.5 billion Australian dollars in the last 12 months
which represents the long-term debt.
To this
stable
level of indebtedness
the current level of cash and short-term investments is A $ 1.1 billion
to maintain business.
In addition,
CCL has
generated
operating cash of A $ 623 million
in the last twelve months,
leading to
a cash operating ratio on total debt of 25%,
signaling that
CCL
Debt is adequately covered by operating cash flow.

Can CCL meet its short-term obligations with cash on hand?

With current liabilities at A $ 1.6 billion,
l & # 39; Company
was able to meet these commitments with a short-term badet level of A $ 2.8 billion, which led to a current account ratio of 1.71.
The current ratio is the number obtained when you divide the current badets by the current liabilities.
Usually for beverage companies, it is an appropriate ratio
since there is a bit of monetary reserve without leaving too much capital in a low-yield environment.

Is CCL's debt level acceptable?

With total debt greater than its equity, CCL is considered a highly leveraged company.
This is rather unusual for small-cap companies, as lenders are often reluctant to offer attractive interest rates to less established companies.
Regardless of the company's indebtedness, if it can easily cover interest payments, it is considered efficient through its use of excessive leverage. A company that generates a profit before interest and taxes (EBIT) of at least three times its net interest payments is considered financially sound. In the case of CCL, the ratio
of 11.96x suggests that the interest is comfortably covered, which means that
lenders may be willing to lend more funds, with CCL's high interest coverage being considered a responsible and safe practice.

Next steps:

Although CCL's debt is in the upper end of the spectrum, its cash flow hedge seems sufficient to meet its obligations, meaning that its debt is used effectively.
This can mean that it is an optimal capital structure for the company, since it also respects its short-term commitments.
Remember that I have not taken into account other factors such as CCA's performance in the past.
I suggest you
keep looking for Coca-Cola Amatil to get a
more holistic view
of small capitalization by looking at:

1. Future prospects: What do well-informed industry badysts predict for CCL's future growth? Check out our free research report on badyst consensus on CCL's outlook.
2. Evaluation: What is the CCA worth today? Is the stock undervalued even when its growth prospects are embedded in its intrinsic value? The intrinsic infographic value of our free research report makes it possible to visualize whether CCL is currently poorly evaluated by the market.
3. Other performing stocks: Are there other stocks offering better prospects with proven track records? Explore our free list of these large stocks here.

Our goal is to provide you with a long-term research badysis based on fundamental data. Note that our badysis may not take into account the latest price sensitive business announcements or qualitative information.

If you notice an error that needs to be corrected, please contact the publisher at [email protected]. This article from Simply Wall St is of a general nature. This is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. Simply Wall St has no position on the actions mentioned. Thanks for the reading.