uploads///Current ratio

Should You Worry about Intermediate Gold Miners’ Liquidity?


Jan. 26 2016, Updated 7:13 a.m. ET

Liquidity position

While financial leverage is important to gauge a company’s long-term solvency, short-term liquidity profiles are also important. In a weaker commodity price environment, short-term liquidity might come under more pressure. A company could be forced to take drastic measures.

Article continues below advertisement

Current ratio

The current ratio is one way to estimate a company’s liquidity. The above graph shows gold miners’ current ratio. It shows a company’s ability to pay its short-term obligations using its short-term assets. The higher the ratio, the better the company can service its short-term liabilities and vice versa.

Other measurements of financial liquidity ratios include the quick ratio, inventory days, payable days, and receivable days. But the current ratio is considered the most comprehensive measure for analyzing the liquidity profile of a company.

Companies’ positions

New Gold (NGD) and Eldorado Gold (EGO) appear to be the best-placed mining companies in terms of short-term liquidity, whereas Sibanye Gold’s current ratio is the poorest placed, as it’s very low. Gold Fields (GFI) and AngloGold Ashanti (AU) have current ratios of 1.3x and 1.6x, respectively.

The SPDR Gold Shares (GLD) and the VanEck Vectors Gold Miners ETF (GDX) are two notable ETFs in the gold industry. Investors can consider these ETFs to get exposure to gold. AngloGold forms 4.5% of the GDX’s portfolio holdings.


More From Market Realist

  • SemiLEDS logo over LED lighting
    Company & Industry Overviews
    There's Still Time to Get in on SemiLEDS (LEDS) Stock
  • Trader on the NYSE
    Company & Industry Overviews
    What Are the Most Expensive Stocks Ever?
  • Michelob Ultra beer
    Company & Industry Overviews
    AB InBev Is the Top Beer Brand Worldwide—Is It a Monopoly?
  • Businesswoman looking out a window
    Company & Industry Overviews
    Shifting Focus: Three Women Investing Funds in 2021
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.