Does First Graphene (ASX:FGR) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that First Graphene Limited (ASX:FGR) does use debt in its business. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

What Is First Graphene's Debt?

You can click the graphic below for the historical numbers, but it shows that First Graphene had AU$2.56m of debt in June 2025, down from AU$3.78m, one year before. However, it does have AU$2.61m in cash offsetting this, leading to net cash of AU$56.9k.

How Healthy Is First Graphene's Balance Sheet?

We can see from the most recent balance sheet that First Graphene had liabilities of AU$3.25m falling due within a year, and liabilities of AU$338.1k due beyond that. On the other hand, it had cash of AU$2.61m and AU$201.5k worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by AU$775.9k.

Having regard to First Graphene's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the AU$63.4m company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, First Graphene boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since First Graphene will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for First Graphene

Given it has no significant operating revenue at the moment, shareholders will be hoping First Graphene can make progress and gain better traction for the business, before it runs low on cash.

So How Risky Is First Graphene?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that First Graphene had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through AU$2.8m of cash and made a loss of AU$5.4m. With only AU$56.9k on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example First Graphene has 6 warning signs (and 3 which make us uncomfortable) we think you should know about.

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.