Does VS MEDIA Holdings (NASDAQ:VSME) Have A Healthy Balance Sheet?

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, VS MEDIA Holdings Limited (NASDAQ:VSME) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is VS MEDIA Holdings's Debt?

As you can see below, VS MEDIA Holdings had US$2.60m of debt at June 2025, down from US$3.64m a year prior. But it also has US$7.40m in cash to offset that, meaning it has US$4.80m net cash.

How Healthy Is VS MEDIA Holdings' Balance Sheet?

According to the last reported balance sheet, VS MEDIA Holdings had liabilities of US$5.37m due within 12 months, and liabilities of US$198.9k due beyond 12 months. Offsetting this, it had US$7.40m in cash and US$958.5k in receivables that were due within 12 months. So it actually has US$2.79m more liquid assets than total liabilities.

This short term liquidity is a sign that VS MEDIA Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that VS MEDIA Holdings has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is VS MEDIA Holdings's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for VS MEDIA Holdings

In the last year VS MEDIA Holdings had a loss before interest and tax, and actually shrunk its revenue by 12%, to US$7.5m. That's not what we would hope to see.

So How Risky Is VS MEDIA Holdings?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that VS MEDIA Holdings had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$2.6m of cash and made a loss of US$8.4m. While this does make the company a bit risky, it's important to remember it has net cash of US$4.80m. That kitty means the company can keep spending for growth for at least two years, at current rates. 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 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. Case in point: We've spotted 4 warning signs for VS MEDIA Holdings you should be aware of, and 3 of them are potentially serious.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.