What Investors Should Know About Golden Dawn Minerals Inc's (CVE:GOM) Financial Strength

Golden Dawn Minerals Inc (TSXV:GOM) is a small-cap stock with a market capitalization of CA$33.64M. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Given that GOM is not presently profitable, it’s essential to understand the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, I know these factors are very high-level, so I recommend you dig deeper yourself into GOM here.

Does GOM generate enough cash through operations?

GOM has built up its total debt levels in the last twelve months, from CA$783.18K to CA$3.55M , which comprises of short- and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at CA$709.06K , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of GOM’s operating efficiency ratios such as ROA here.

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

With current liabilities at CA$5.42M, it appears that the company has not been able to meet these commitments with a current assets level of CA$820.67K, leading to a 0.15x current account ratio. which is under the appropriate industry ratio of 3x.

Can GOM service its debt comfortably?

With total debt exceeding equities, GOM is considered a highly levered company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since GOM is presently loss-making, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.

Next Steps:

GOM’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for GOM's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Golden Dawn Minerals to get a more holistic view of the stock by looking at:

• 1. Historical Performance: What has GOM's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
• 2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.