Axiom Properties (ASX:AXI) Is Using Debt Safely

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.' 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. We note that Axiom Properties Limited (ASX:AXI) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Axiom Properties Carry?

The chart below, which you can click on for greater detail, shows that Axiom Properties had AU$5.18m in debt in June 2025; about the same as the year before. However, its balance sheet shows it holds AU$5.70m in cash, so it actually has AU$522.0k net cash.

How Healthy Is Axiom Properties' Balance Sheet?

The latest balance sheet data shows that Axiom Properties had liabilities of AU$4.78m due within a year, and liabilities of AU$2.45m falling due after that. On the other hand, it had cash of AU$5.70m and AU$3.36m worth of receivables due within a year. So it actually has AU$1.83m more liquid assets than total liabilities.

This surplus suggests that Axiom Properties is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that Axiom Properties has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Axiom Properties'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.

View our latest analysis for Axiom Properties

In the last year Axiom Properties wasn't profitable at an EBIT level, but managed to grow its revenue by 107%, to AU$3.3m. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is Axiom Properties?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Axiom Properties had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through AU$2.0m of cash and made a loss of AU$2.2m. While this does make the company a bit risky, it's important to remember it has net cash of AU$522.0k. That kitty means the company can keep spending for growth for at least two years, at current rates. The good news for shareholders is that Axiom Properties has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Axiom Properties has 4 warning signs (and 3 which shouldn't be ignored) we think 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.