Beeks Financial Cloud Group (LON:BKS) Has Debt But No Earnings; Should You Worry?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Beeks Financial Cloud Group plc (LON:BKS) does use debt in its business. But the more important question is: how much risk is that debt creating?

Why Does Debt Bring Risk?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Beeks Financial Cloud Group

What Is Beeks Financial Cloud Group's Debt?

You can click the graphic below for the historical numbers, but it shows that Beeks Financial Cloud Group had UK£1.81m of debt in June 2023, down from UK£2.30m, one year before. However, its balance sheet shows it holds UK£7.83m in cash, so it actually has UK£6.02m net cash.

How Healthy Is Beeks Financial Cloud Group's Balance Sheet?

We can see from the most recent balance sheet that Beeks Financial Cloud Group had liabilities of UK£8.73m falling due within a year, and liabilities of UK£5.93m due beyond that. On the other hand, it had cash of UK£7.83m and UK£5.35m worth of receivables due within a year. So its liabilities total UK£1.48m more than the combination of its cash and short-term receivables.

Having regard to Beeks Financial Cloud Group's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the UK£74.8m company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Beeks Financial Cloud Group also has more cash than debt, so we're pretty confident it can manage its debt safely. 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 Beeks Financial Cloud Group's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, Beeks Financial Cloud Group reported revenue of UK£22m, which is a gain of 22%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Beeks Financial Cloud Group?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Beeks Financial Cloud Group lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through UK£207k of cash and made a loss of UK£89k. With only UK£6.02m on the balance sheet, it would appear that its going to need to raise capital again soon. Beeks Financial Cloud Group's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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. Be aware that Beeks Financial Cloud Group is showing 1 warning sign in our investment analysis , you should know about...

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.