Financial Risk Summary
- 01:17
An overview of Smithy's financial risk
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Transcript
We're now getting to a place where we can start drawing some conclusions here on financial risk for Smithy. First of all though, let's just have a look at that liquidity calculations that we just did in Excel. Here on the screen, we've done them for year one, two, and three, and we can see that in all years the liquidity ratio is looking very strong, especially in the first two years. It's dropping off a little bit at year three. So what are conclusions here on financial risk? Well, if we look at the balance sheet, we're gonna put that at relatively low risk here. There's not an enormous amount of debt on there right now. If we look at the earnings though, we see they're falling, they're weak, so we're gonna call that intermediate to significant risk in terms of the earnings. And cash flows are pretty weak and falling, so we're gonna put them at a significant risk rating here. However, as we've just seen, the liquidity is looking really strong. Liquidity clearly is a strong suit here for Smithy. So overall, our conclusion there is that the financial risk sits somewhere in between the intermediate and the significant risk buckets.