Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Suzhou Gold Mantis Construction Decoration Co., Ltd. (SZSE:002081) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Suzhou Gold Mantis Construction Decoration Carry?

As you can see below, Suzhou Gold Mantis Construction Decoration had CN¥917.1m of debt at September 2023, down from CN¥1.08b a year prior. However, it does have CN¥6.63b in cash offsetting this, leading to net cash of CN¥5.71b.

A Look At Suzhou Gold Mantis Construction Decoration's Liabilities

The latest balance sheet data shows that Suzhou Gold Mantis Construction Decoration had liabilities of CN¥23.1b due within a year, and liabilities of CN¥778.3m falling due after that. On the other hand, it had cash of CN¥6.63b and CN¥23.4b worth of receivables due within a year. So it can boast CN¥6.11b more liquid assets than total liabilities.

This luscious liquidity implies that Suzhou Gold Mantis Construction Decoration's balance sheet is sturdy like a giant sequoia tree. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Suzhou Gold Mantis Construction Decoration boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Suzhou Gold Mantis Construction Decoration can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Suzhou Gold Mantis Construction Decoration had a loss before interest and tax, and actually shrunk its revenue by 9.9%, to CN¥21b. That's not what we would hope to see.

So How Risky Is Suzhou Gold Mantis Construction Decoration?

Although Suzhou Gold Mantis Construction Decoration had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of CN¥921m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. The next few years will be important as the business matures. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Suzhou Gold Mantis Construction Decoration you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.