Here's Why DMG Blockchain Solutions (CVE:DMGI) Can Afford Some Debt

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 DMG Blockchain Solutions Inc. (CVE:DMGI) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does DMG Blockchain Solutions Carry?

As you can see below, DMG Blockchain Solutions had CA$12.7m of debt at June 2025, down from CA$13.8m a year prior. On the flip side, it has CA$11.5m in cash leading to net debt of about CA$1.17m.

A Look At DMG Blockchain Solutions' Liabilities

We can see from the most recent balance sheet that DMG Blockchain Solutions had liabilities of CA$19.2m falling due within a year, and liabilities of CA$107.4k due beyond that. On the other hand, it had cash of CA$11.5m and CA$3.96m worth of receivables due within a year. So it has liabilities totalling CA$3.77m more than its cash and near-term receivables, combined.

Of course, DMG Blockchain Solutions has a market capitalization of CA$114.9m, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. But either way, DMG Blockchain Solutions has virtually no net debt, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine DMG Blockchain Solutions's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for DMG Blockchain Solutions

Over 12 months, DMG Blockchain Solutions reported revenue of CA$42m, which is a gain of 24%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, DMG Blockchain Solutions still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CA$14m. 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. Another cause for caution is that is bled CA$5.0m in negative free cash flow over the last twelve months. So suffice it to say we do consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 4 warning signs we've spotted with DMG Blockchain Solutions (including 1 which is a bit concerning) .

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.