What You Must Know About CBS Corporation's (NYSE:CBS) Financial Strength

There are a number of reasons that attract investors towards large-cap companies such as CBS Corporation (NYSE:CBS), with a market cap of $22.33B. Big corporations are much sought after by risk-averse investors who find diversified revenue streams and strong capital returns attractive. However, its financial health remains the key to continued success. Let’s take a look at CBS’s leverage and assess its financial strength to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into CBS here. See our latest analysis for CBS

How does CBS’s operating cash flow stack up against its debt?

Over the past year, CBS has ramped up its debt from $8,448.0M to $9,375.0M , which is made up of current and long term debt. With this increase in debt, CBS currently has $598.0M remaining in cash and short-term investments , ready to deploy into the business. Additionally, CBS has produced cash from operations of $1,685.0M over the same time period, leading to an operating cash to total debt ratio of 17.97%, meaning that CBS’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In CBS’s case, it is able to generate 0.18x cash from its debt capital.

Can CBS pay its short-term liabilities?

Looking at CBS’s most recent $3,708.0M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.64x. Generally, for Media companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

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

Considering CBS’s total debt outweighs its equity, the company is deemed highly levered. This is common amongst large-cap companies because debt can often be a less expensive alternative to equity due to tax deductibility of interest payments. Consequently, larger-cap organisations tend to enjoy lower cost of capital as a result of easily attained financing, providing an advantage over smaller companies. We can check to see whether CBS is able to meet its debt obligations by looking at the net interest coverage ratio. Preferably, earnings before interest and tax (EBIT) should be at least three times as large as net interest. For CBS, the ratio of 7.25x suggests that interest is appropriately covered. It is considered a responsible and reassuring practice to maintain high interest coverage, which makes CBS and other large-cap investments thought to be safe.

Next Steps:

At its current level of cash flow coverage, CBS has room for improvement to better cushion for events which may require debt repayment. Though, the company exhibits an ability to meet its near-term obligations, which isn't a big surprise for a large-cap. This is only a rough assessment of financial health, and I'm sure CBS has company-specific issues impacting its capital structure decisions. You should continue to research CBS to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for CBS’s future growth? Take a look at our free research report of analyst consensus for CBS’s outlook.
• 2. Valuation: What is CBS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CBS is currently mispriced by the market.
• 3. 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.