RE:RE:DEBT vs TOTAL LIABILITIES vs Equity..... The Big Picture.All True what you say.... Of coarse you consider these things when analysis of Debt, Total Liabilities, Equity..... You get the "Big Picture" FIRST, and then you drill down and find out how the "Big Picture" is made up of.
If you focus on the "Trees", you most likely get lost and never see the "big picture".
All just my opinion/view/thinking.
CashHungry wrote: Top 3 problems with your analytical choices:
1) Total liabilities include current liabilities and very large current liabilities could be offset by equal large or larger current assets. Hence total liabilities could be growing, but financially and operationally the company may be in great shape increasing profitable business.
2) Equity is Total Assets less Total Liabilities and Total Assets can be very unaligned with reality. Companies try to correct this occassional with right offs and reversals. In the past two years there were massive right-offs, with some companies partially reversing those right offs in the past couple quarters. The fact is Equity at times can be essentially meaningless.
3) CVE's Total Liabilities was hugely affected by the Husky merger. How do you make any sense of what the increased debt means without considering its ability to generate additional cash? One of the most helpful metrics is Debt/CF, as it gives an accurate comparative measurement (btw peer companies and comparing time periods) of the ability of the company to manage its debt. Interest coverage is another useful metric when looking at debt.