Does Critical Infrastructure Technologies (CSE:CTTT) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 note that Critical Infrastructure Technologies Ltd. (CSE:CTTT) 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?

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. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Critical Infrastructure Technologies's Debt?

As you can see below, at the end of June 2025, Critical Infrastructure Technologies had CA$2.11m of debt, up from CA$1.09m a year ago. Click the image for more detail. On the flip side, it has CA$226.9k in cash leading to net debt of about CA$1.88m.

How Healthy Is Critical Infrastructure Technologies' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Critical Infrastructure Technologies had liabilities of CA$3.82m due within 12 months and no liabilities due beyond that. Offsetting this, it had CA$226.9k in cash and CA$472.4k in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$3.12m.

Given Critical Infrastructure Technologies has a market capitalization of CA$123.0m, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Critical Infrastructure Technologies will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Critical Infrastructure Technologies

Given it has no significant operating revenue at the moment, shareholders will be hoping Critical Infrastructure Technologies can make progress and gain better traction for the business, before it runs low on cash.

Caveat Emptor

Over the last twelve months Critical Infrastructure Technologies produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at CA$823k. 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 CA$594k of cash over the last year. 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. However, not all investment risk resides within the balance sheet - far from it. For example Critical Infrastructure Technologies has 4 warning signs (and 3 which can't be ignored) we think you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.