Largo’s Short Term Financial Health As at Dec 31 2023:
Largo’s Current Ratio is positive = 3.2 with Net Working Capital = Current Assets - Current Liabilities = US$137.1 - 42.5M = $94.6M indicating a very healthy short term financial situation for a micro company with a market cap of ~$96M A liquidity metric more stringent than Current Ratio = Acid-test ratio which includes only “quick”assets that can be converted to cash within 90 days or less. Largo’s Acid Test ratio is also positive = 1.6 (or (Cash + Marketable Securities + AR) / Current Liabilities = US$69.0M / $42.5), indicating that the company currently has more than enough cash to pay its immediate obligations.
Largo’s short term financial health is strong but the situation can change quickly if the company can’t control its spending while V prices continue to stay in the gutter. Note that Largo still has US$75M in long term debt and that the total finance costs jumped by 506% for 2023 (~US$9.6M) as a result of the increased debt level and higher interest rates.