Lesson 5 of 7
The ladder and the cushion
The maturity schedule read beside the cash and the cash generation, from one filing, for one fiscal year, using no ratio of two balance sheet lines at all.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- The credit question here is answered by a note and a cash flow statement, not by a ratio of two balance sheet lines.
- The fifth rung of this filer's schedule is 79 times the fourth and 95.4 percent of one year of operating cash flow.
- Cash at a year end covers the first three rungs, which is a fact about a date and not about the years in between.
Three lessons ago the usual instruments turned out not to exist here. This one answers the question they were for, with figures from the same filing.
The five-year maturity schedule, with operating cash flow marked
- Year 1258$m
- Year 2508$m
- Year 3411$m
- Year 413$m
- Year 51,061$m
Operating cash flow, fiscal 2025: 1,112$m
The ladder
From the fiscal 2025 annual report, principal due by year: 257.9 million dollars in year one, 507.9 in year two, 411.2 in year three, 13.4 in year four and 1,061.0 in year five. The five rungs total 2,251.4 million.
The shape is four modest years and one large one. Year five is 79 times year four, and it is nearly half of the whole five-year total on its own.
The cushion
Two figures answer what stands against it, and both are in the same filing. Cash and cash equivalents at the year end were 1,259.0 million dollars. Operating cash flow for the year was 1,112.4 million.
So the cash on hand at that date exceeded the first three rungs combined, which total 1,177.0 million. And one year of operating cash flow was 95.4 percent of the fifth rung on its own.
The two comparisons, and what each is worth
Cash against the near rungs is the stronger comparison, because both figures are certain: the cash existed on a stated date and the obligations are contractual. What it does not account for is everything else the cash will be used for between now and then, which at a company whose inventory is 73.5 percent of its assets is a great deal.
Operating cash flow against the far rung is the weaker one, because it compares a contractual obligation four years out with one year's cash generation at a business whose result varies by more than eleven margin points across this window. It sizes the obligation in a familiar unit rather than establishing anything.
Why this is the answer rather than a workaround
Because it uses the disclosure that is contractual and dated, which is stronger evidence than any ratio would have been. A current ratio would have compared two balances on a day the company chose. The schedule states what is owed and when, and the company agreed to it.
The absence of the ratio pushed the reading towards better evidence, which is the argument the bridge course made and this is the demonstration of it.
Check yourself
What does cash of 1,259.0 million against three rungs totalling 1,177.0 million establish?
- That the debt will be repaid
- That cash held at that date exceeded the principal due in the first three rungs as filed
- That the company has no refinancing need
Show the answer
Answer: B.
It is a fact about a date. The cash will be spent and generated in the intervening years and the fifth rung is untouched by it.Why is operating cash flow against the fifth rung the weaker of the two comparisons?
- Because operating cash flow is unaudited
- Because it compares a contractual obligation four years out with one year's cash generation at a business whose result varies widely
- Because the fifth rung may be refinanced
Show the answer
Answer: B.
It sizes the obligation in a familiar unit. It does not establish that the obligation can be met.Why is the schedule better evidence than a current ratio would have been?
- Because it is audited more thoroughly
- Because it is contractual and dated, while a current ratio compares two balances on a day the company chose
- Because it includes interest
Show the answer
Answer: B.
The schedule excludes interest. What makes it stronger is that the company agreed to the dates, so they are not an artefact of a reporting convention.Sources
- Toll Brothers, Inc., annual report on Form 10-K for the fiscal year ended 31 October 2025, accession 0000794170-25-000112, filed 19 December 2025, for the five-year maturity schedule, cash and cash equivalents, operating cash flow, capital expenditure and inventory.
What this leaves out
- The maturity schedule is the company's contractual position at one date and covers long-term debt principal only. Interest is not in it and obligations not classified as debt are not in it.
- Debt is routinely refinanced, repaid early and reissued, so a schedule filed a year later will differ for entirely ordinary reasons and is not a correction of this one.
- Every comparison above uses figures from one fiscal year. A single year at a business whose operating margin ranges over eleven points in this window is a thin base for anything.
- Nothing here is a view on Toll Brothers or on any security.