Is Jia Yao Holdings (HKG:1626) Weighed On By Its Debt Load?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. As with many other companies Jia Yao Holdings Limited (HKG:1626) makes use of debt. But the more important question is: how much risk is that debt creating?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

What Is Jia Yao Holdings's Net Debt?

As you can see below, Jia Yao Holdings had CN¥59.9m of debt at June 2025, down from CN¥114.8m a year prior. But on the other hand it also has CN¥114.6m in cash, leading to a CN¥54.7m net cash position.

How Strong Is Jia Yao Holdings' Balance Sheet?

The latest balance sheet data shows that Jia Yao Holdings had liabilities of CN¥246.3m due within a year, and liabilities of CN¥53.7m falling due after that. Offsetting these obligations, it had cash of CN¥114.6m as well as receivables valued at CN¥186.1m due within 12 months. So its total liabilities are just about perfectly matched by its shorter-term, liquid assets.

This state of affairs indicates that Jia Yao Holdings' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the CN¥1.56b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, Jia Yao Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is Jia Yao Holdings's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for Jia Yao Holdings

In the last year Jia Yao Holdings had a loss before interest and tax, and actually shrunk its revenue by 83%, to CN¥288m. That makes us nervous, to say the least.

So How Risky Is Jia Yao Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Jia Yao Holdings lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through CN¥48m of cash and made a loss of CN¥10m. Given it only has net cash of CN¥54.7m, the company may need to raise more capital if it doesn't reach break-even soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Jia Yao Holdings's profit, revenue, and operating cashflow have changed over the last few years.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.