ANTA Sports Products (HKG:2020) Has A Rock Solid Balance Sheet

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, ANTA Sports Products Limited (HKG:2020) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 think about a company's use of debt, we first look at cash and debt together.

What Is ANTA Sports Products's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 ANTA Sports Products had CN¥24.0b of debt, an increase on CN¥15.4b, over one year. But it also has CN¥32.0b in cash to offset that, meaning it has CN¥8.00b net cash.

A Look At ANTA Sports Products' Liabilities

The latest balance sheet data shows that ANTA Sports Products had liabilities of CN¥30.1b due within a year, and liabilities of CN¥18.4b falling due after that. Offsetting this, it had CN¥32.0b in cash and CN¥3.75b in receivables that were due within 12 months. So its liabilities total CN¥12.7b more than the combination of its cash and short-term receivables.

Since publicly traded ANTA Sports Products shares are worth a very impressive total of CN¥234.0b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, ANTA Sports Products also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for ANTA Sports Products

And we also note warmly that ANTA Sports Products grew its EBIT by 10% last year, making its debt load easier to handle. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if ANTA Sports Products can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While ANTA Sports Products has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, ANTA Sports Products actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

We could understand if investors are concerned about ANTA Sports Products's liabilities, but we can be reassured by the fact it has has net cash of CN¥8.00b. And it impressed us with free cash flow of CN¥16b, being 103% of its EBIT. So we don't think ANTA Sports Products's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. We've identified 1 warning sign with ANTA Sports Products , and understanding them should be part of your investment process.

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.