【cheder d monsey】What You Must Know About Total Brain Limited’s (ASX:TTB) Financial Strength

Total Brain Limited (

ASX:TTB

),cheder d monsey which has zero-debt on its balance sheet, can maximize capital returns by increasing debt due to its lower cost of capital. However, the trade-off is TTB will have to follow strict debt obligations which will reduce its financial flexibility. While TTB has no debt on its balance sheet, it doesn’t necessarily mean it exhibits financial strength. I will go over a basic overview of the stock’s financial health, which I believe provides a ballpark estimate of their financial health status.

See our latest analysis for Total Brain

Does TTB’s growth rate justify its decision for financial flexibility over lower cost of capital?

There are well-known benefits of including debt in capital structure, primarily a lower cost of capital. However, the trade-off is debtholders’ higher claim on company assets in the event of liquidation and stringent obligations around capital management. The lack of debt on TTB’s balance sheet may be because it does not have access to cheap capital, or it may believe this trade-off is not worth it. Choosing financial flexibility over capital returns make sense if TTB is a high-growth company. A single-digit revenue growth of 8.5% for TTB is considerably low for a small-cap company. While its low growth hardly justifies opting for zero-debt, the company may have high growth projects in the pipeline to justify the trade-off.

ASX:TTB Historical Debt, March 1st 2019

Does TTB’s liquid assets cover its short-term commitments?

Given zero long-term debt on its balance sheet, Total Brain 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. With current liabilities at AU$978k, it seems that the business has been able to meet these obligations given the level of current assets of AU$8.0m, with a current ratio of 8.14x. Having said that, a ratio greater than 3x may be considered high by some.

Next Steps:

TTB 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 TTB’s liquidity needs, this may be its optimal capital structure for the time being. Going forward, its financial position may be different. Keep in mind I haven’t considered other factors such as how TTB has been performing in the past. I suggest you continue to research Total Brain to get a better picture of the stock by looking at:

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Historical Performance

: What has TTB’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.

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. This article by Simply Wall St is general in nature. 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. Thank you for reading.

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