This report is 11 months old but I would believe that the...

This report is 11 months old but I would believe that the situation for Tap is much better currently.

News
What does Tap Oil Limited’s (ASX:TAP) Balance Sheet Tell Us Abouts Its Future?
Mercedes Harden
11 months ago

Investors are always looking for growth in small-cap stocks like Tap Oil Limited (ASX:TAP), with a market cap of AUD $23.43M. However, an important fact which most ignore is: how financially healthy is the company? The significance of doing due diligence on a company’s financial strength stems from the fact that over 20,000 companies go bankrupt in every quarter in the US alone. Here are few basic financial health checks to judge whether a company fits the bill or there is an additional risk which you should consider before taking the plunge. View our latest analysis for Tap Oil

Does TAP generate an acceptable amount of cash through operations?



ASX:TAP Historical Debt Oct 4th 17
While failure to manage cash has been one of the major reasons behind the demise of a lot of small businesses, mismanagement comes into the light during tough situations such as economic recessions, wars and natural disasters.These catastrophes does not mean the company can stop servicing its debt obligations.Can TAP pay off what it owes to its debtholder by using only cash from its operational activities? In the case of TAP, operating cash flow over the past twelve months do cover its current debt,which indicates extremely low risk of TAP not being able to meet its debt near-team, given that it generates enough cash in a year to pay off its current debt.This reflects proper cash and debt management by the company – great news for both debtholders and shareholders.


Can TAP meet its short-term obligations with the cash in hand?



ASX:TAP Net Worth Oct 4th 17
What about its other commitments such as payments to suppliers and salaries to its employees? As cash flow from operation is hindered by adverse events, TAP may need to liquidate its short-term assets to meet these upcoming payments. We test for TAP’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that TAP does not have enough liquid assets on hand to meet its upcoming liabilities. Though this is a common practice, since cash is better utilized invested in the business or returned to shareholders, it does raise some concerns for investors should adverse events arise.




Does TAP face the risk of succumbing to its debt-load?
While ideally the debt-to equity ratio of a financially healthy company should be less than 40%, several factors such as industry life-cycle and economic conditions can result in a company raising a significant amount of debt. In the case of TAP, the debt-to-equity ratio is 8.72%, which indicates that the company faces low risk associated with debt.

Final words
TAP’s relatively safe debt levels is even more impressive due to its ability to generate high cash flow, which illustrates operating efficiency

TPA