why we need to watch the total money a company owes on its assets, and how it affects the company's health.

Imagine if you took your favorite toy and promised to give it away to your friends but, you're not sure how to get the toy or who will give it to you. You're in trouble, right? This is similar to a company that has promised to pay money to its creditors (people it borrowed money from) but, it's not sure how it will get the money.

So, to find out if the company is healthy or sick, we look at how much money it owes to others. There's a simple way to do that: divide the total money it owes by how much it makes in a year (this is called EBITDA - it's a bit of a funny name but it's just an abbreviation for earnings before interest, taxes, depreciation, and amortization). If the number is less than 2, it means the company has enough assets to cover its debts, and it's probably in good shape. If the number is between 2 and 7, it means the company is not in terrible shape but it might have trouble getting the money it needs to pay its debts. If the number is more than 7, it means the company is in big trouble and might not be able to pay its debts.

That's why we need to watch the total money a company owes on its assets. It helps us find out if the company is healthy or sick and, if it's sick, how sick it might be. Read from source...

1. The article from Viridian Capital Advisors seems to be a well-written piece providing valuable insights into the cannabis credit markets. However, the choice of leveraging ratios as a risk indicator in the cannabis industry is questionable.

2. The article is a bit vague in explaining how it determined the leverage ratios. For example, the article claims that the leverage metrics are the two most important ones for analyzing credit risk in the cannabis sector. However, it doesn't provide any clear evidence or reasoning to support this claim.

3. The article doesn't seem to take into account the nuances and complexities of the cannabis credit market, and it oversimplifies the credit risk analysis process.

4. It is also worth mentioning that the article seems to be a bit promotional of Viridian Capital Advisors' services. For instance, the article mentions that the Viridian Cannabis Deal Tracker provides valuable market intelligence to cannabis companies, investors, and acquirers to make informed decisions regarding capital allocation and M&A strategy. However, it doesn't provide any clear evidence or reasoning to support this claim.

5. The article would have been more insightful if it had provided concrete examples of how investors could use the leverage ratios to analyze credit risk in the cannabis sector.

6. The article would have been more informative if it had included a disclaimer that it doesn't provide investment advice.

7. Overall, the article is a good starting point for investors interested in analyzing credit risk in the cannabis sector. However, investors should use it as a reference and not rely solely on it for making investment decisions.

bullish

This article seems to be bullish as it discusses the credit markets of the cannabis industry coming back to life with several major refinancing deals. The market is becoming more sophisticated, and there is a tremendous spread of yields required based on perceived credit quality. The article also highlights two leverage metrics and explains that trading yields are much better correlated with total liabilities to market cap than with Debt/ EBITDA. The former is an excellent early warning sign of credit difficulties. The article recommends monitoring total liabilities to market cap as an early warning indicator and mentions that companies with total liabilities to market cap of less than 2x have significant financial flexibility and strong asset value coverage of liabilities. Overall, the article seems to be optimistic about the cannabis credit markets.