Does Sin Cars Industry AD (BUL:SIN) 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. We can see that Sin Cars Industry AD (BUL:SIN) does use debt in its business. But the more important question is: how much risk is that debt creating?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Sin Cars Industry AD

What Is Sin Cars Industry AD's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2024 Sin Cars Industry AD had лв2.88m of debt, an increase on лв1.76m, over one year. On the flip side, it has лв157.0k in cash leading to net debt of about лв2.73m.

How Strong Is Sin Cars Industry AD's Balance Sheet?

We can see from the most recent balance sheet that Sin Cars Industry AD had liabilities of лв3.52m falling due within a year, and liabilities of лв3.56m due beyond that. Offsetting this, it had лв157.0k in cash and лв2.48m in receivables that were due within 12 months. So its liabilities total лв4.44m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of лв7.19m, so it does suggest shareholders should keep an eye on Sin Cars Industry AD's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. There's no doubt that we learn most about debt from the balance sheet. But it is Sin Cars Industry AD'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.

In the last year Sin Cars Industry AD wasn't profitable at an EBIT level, but managed to grow its revenue by 49%, to лв5.9m. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

While we can certainly appreciate Sin Cars Industry AD's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. To be specific the EBIT loss came in at лв213k. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through лв1.2m of cash over the last year. So suffice it to say we consider the stock very risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Be aware that Sin Cars Industry AD is showing 4 warning signs in our investment analysis , and 3 of those don't sit too well with us...

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.