Would Danish Aerospace (CPH:DAC) Be Better Off With Less Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Danish Aerospace Company A/S (CPH:DAC) does carry debt. 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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Danish Aerospace's Net Debt?

The image below, which you can click on for greater detail, shows that Danish Aerospace had debt of kr.13.1m at the end of June 2025, a reduction from kr.16.1m over a year. And it doesn't have much cash, so its net debt is about the same.

How Strong Is Danish Aerospace's Balance Sheet?

According to the last reported balance sheet, Danish Aerospace had liabilities of kr.17.8m due within 12 months, and liabilities of kr.2.52m due beyond 12 months. Offsetting these obligations, it had cash of kr.200.1k as well as receivables valued at kr.20.8m due within 12 months. So it actually has kr.596.0k more liquid assets than total liabilities.

Having regard to Danish Aerospace's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the kr.156.0m company is short on cash, but still worth keeping an eye on the balance sheet. There's no doubt that we learn most about debt from the balance sheet. But it is Danish Aerospace'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.

View our latest analysis for Danish Aerospace

In the last year Danish Aerospace had a loss before interest and tax, and actually shrunk its revenue by 36%, to kr.20m. That makes us nervous, to say the least.

Caveat Emptor

Not only did Danish Aerospace's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at kr.1.4m. On a more positive note, the company does have liquid assets, so it has a bit of time to improve its operations before the debt becomes an acute problem. But a profit would do more to inspire us to research the business more closely. So it seems too risky for our taste. 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. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Danish Aerospace (of which 2 are significant!) 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.