While small-cap stocks, such as Eurasia Mining Plc (AIM:EUA) with its market cap of GBP £4.48M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since EUA is loss-making right now, it’s vital to assess the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into EUA here.

Does EUA generate an acceptable amount of cash through operations?

Over the past year, EUA has borrowed debt capital of around £0M – this includes both the current and long-term debt. With this increase in debt, EUA’s cash and short-term investments stands at £0M , ready to deploy into the business. However, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can assess some of EUA’s operating efficiency ratios such as ROA here.

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

With current liabilities at £0M liabilities, it appears that the company is not able to meet these obligations given the level of current assets of £0M, with a current ratio of 0.69x below the prudent level of 3x.

Does EUA face the risk of succumbing to its debt-load?

EUA’s level of debt is appropriate relative to its total equity, at 31.44%. EUA is not taking on too much debt commitment, which may be constraining for future growth. EUA’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.

Next Steps:

Are you a shareholder? EUA’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. In addition to this, the company may not be able to pay all of its upcoming liabilities from its current short-term assets. Given that its financial position may be different. You should always be researching market expectations for EUA’s future growth on our free analysis platform.

Are you a potential investor? EUA seems to have a sensible level of debt, meaning there’s some room to take on more debt if needed. But its current cash flow coverage of existing debt, in addition to the low liquidity, is concerning. Though, keep in mind that this is a point-in-time analysis, and today’s performance may not be representative of EUA’s track record. As a following step, you should take a look at EUA’s past performance analysis on our free platform to figure out EUA’s financial health position.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.