Does Zedcor (CVE:ZDC) 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 Zedcor Inc. (CVE:ZDC) 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?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Zedcor's Debt?

You can click the graphic below for the historical numbers, but it shows that Zedcor had CA$19.3m of debt in March 2025, down from CA$21.6m, one year before. However, it does have CA$20.4m in cash offsetting this, leading to net cash of CA$1.05m.

How Healthy Is Zedcor's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Zedcor had liabilities of CA$16.3m due within 12 months and liabilities of CA$20.2m due beyond that. On the other hand, it had cash of CA$20.4m and CA$9.40m worth of receivables due within a year. So its liabilities total CA$6.69m more than the combination of its cash and short-term receivables.

Having regard to Zedcor's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the CA$377.9m company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Zedcor also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for Zedcor

Notably, Zedcor's EBIT launched higher than Elon Musk, gaining a whopping 259% on last year. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Zedcor can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Zedcor has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Zedcor saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Zedcor has CA$1.05m in net cash. And it impressed us with its EBIT growth of 259% over the last year. So we don't have any problem with Zedcor's use of debt. 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. For example, we've discovered 1 warning sign for Zedcor that you should be aware of before investing here.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.