We Think Jericho Energy Ventures (CVE:JEV) Has A Fair Chunk Of Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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 Jericho Energy Ventures Inc. (CVE:JEV) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Jericho Energy Ventures's Debt?

You can click the graphic below for the historical numbers, but it shows that Jericho Energy Ventures had US$2.47m of debt in March 2025, down from US$4.05m, one year before. However, because it has a cash reserve of US$838.3k, its net debt is less, at about US$1.63m.

A Look At Jericho Energy Ventures' Liabilities

According to the last reported balance sheet, Jericho Energy Ventures had liabilities of US$4.64m due within 12 months, and liabilities of US$9.8k due beyond 12 months. Offsetting these obligations, it had cash of US$838.3k as well as receivables valued at US$35.3k due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$3.78m.

Given Jericho Energy Ventures has a market capitalization of US$29.8m, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Jericho Energy Ventures will need earnings to service that debt. 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.

Check out our latest analysis for Jericho Energy Ventures

Given its lack of meaningful operating revenue, Jericho Energy Ventures shareholders no doubt hope it can fund itself until it can sell some combustibles.

Caveat Emptor

While Jericho Energy Ventures's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping US$5.1m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through US$3.2m of cash over the last year. So in short it's a really risky stock. 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 Jericho Energy Ventures has 5 warning signs (and 3 which are potentially serious) we think you should know about.

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.