Elite Pharmaceuticals Inc (ELTP)

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You are on target about what is toxic debt...

Toxic debt generally adheres to one of the following criteria: default rates for the particular debt are in the double digits, more debt is accumulated than what can comfortably be paid back, the interest rates of the obligation are subject to discretionary changes. Any debt could potentially be considered "toxic" if it imposes harm onto the financial position of the holder.

Read more: Toxic Debt Definition | Investopedia http://www.investopedia.com/terms/t/toxic-debt.asp#ixzz4Sl7D0GZH
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Now, let's extend the discussion...

Please note the key point on toxicity of debt is whether it can be paid back upon demand. Is there a specific type of analysis that would provide keen insights about whether debt might not be able to be paid back? Why yes there is...it is called the Current Ratio…which is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. Read more: Current Ratio Definition | Investopedia http://www.investopedia.com/terms/c/currentratio.asp#ixzz4Sl9jPEdR

Acceptable current ratios vary from industry to industry. A creditor would consider a high current ratio to be better than a low current ratio, because a high current ratio indicates that the company is able to pay the creditor back because the company has more assets than liabilities. So, let’s explore the facts…the current ratio is simple math – it is total assets divided by total liabilities. So looking at Elite’s financials what do we find?

Last year at this point the quarterly report reflected a current ratio of 2.32. This means Elite had the ability to pay back its debts 2.3 times. Any company above 1.00 is considered to not be at risk for meeting its debt obligations. But to be MORE than double is outstanding and indicative of Elite's strong financial position. But what about this year? Well, Elite’s current ratio at this point in the fiscal year is 2.81...or an ability to pay all its debts by almost three times. A YOY comparison shows Elite’s ability to pay its debts has increased 21% over the previous year…twenty-one percent! For some context, Pfizer’s current ratio is 1.37 and for the entire pharma industry it is 1.47. So please, the facts are clear…Elite has no toxic debt nor are they facing bankruptcy. Elite is on very solid financial ground. And when we start to add in additional products (as we note the recent ANDA filing) its value increases significantly. Long term shareholders are well positioned.