Is Daily Mail and General Trust (LON:DMGT) Using Too Much Debt?
Summary
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. But it is future earnings, more than anything, that will determine Daily Mail and General Trusts ability to maintain a healthy balance sheet going forward. Over the last three years, Daily Mail and General Trust recorded free cash flow worth a fulsome 89% of its EBIT, which is stronger than wed usually expect. Although Daily Mail and General Trusts balance sheet isnt particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of UK£84.5m.