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Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Flight Centre Travel Group Limited (ASX:FLT) with a market-capitalization of AU$4.4b, rarely draw their attention. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine FLT’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into FLT here.

Check out our latest analysis for Flight Centre Travel Group

FLT’s Debt (And Cash Flows)

FLT's debt levels have fallen from AU$91m to AU$36m over the last 12 months – this includes long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at AU$394m , ready to be used for running the business. Moreover, FLT has produced AU$221m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 619%, meaning that FLT’s debt is appropriately covered by operating cash.

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

At the current liabilities level of AU$1.3b, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.52x. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Hospitality companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.

Is FLT’s debt level acceptable?

With a debt-to-equity ratio of 2.4%, FLT's debt level is relatively low. FLT is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.

Next Steps:

FLT’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for FLT's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Flight Centre Travel Group to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for FLT’s future growth? Take a look at our free research report of analyst consensus for FLT’s outlook.

2. Valuation: What is FLT 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 FLT 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.