These 4 Measures Indicate That DPC Dash (HKG:1405) Is Using Debt Safely

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. We can see that DPC Dash Ltd (HKG:1405) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. 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 DPC Dash Carry?

The chart below, which you can click on for greater detail, shows that DPC Dash had CN¥200.0m in debt in June 2025; about the same as the year before. However, it does have CN¥1.02b in cash offsetting this, leading to net cash of CN¥816.8m.

A Look At DPC Dash's Liabilities

Zooming in on the latest balance sheet data, we can see that DPC Dash had liabilities of CN¥1.38b due within 12 months and liabilities of CN¥1.52b due beyond that. Offsetting this, it had CN¥1.02b in cash and CN¥16.4m in receivables that were due within 12 months. So it has liabilities totalling CN¥1.86b more than its cash and near-term receivables, combined.

Since publicly traded DPC Dash shares are worth a total of CN¥9.95b, 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. Despite its noteworthy liabilities, DPC Dash boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for DPC Dash

Pleasingly, DPC Dash is growing its EBIT faster than former Australian PM Bob Hawke downs a yard glass, boasting a 269% gain in the last twelve months. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine DPC Dash'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. DPC Dash may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, DPC Dash actually produced more free cash flow than EBIT over the last two years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

Although DPC Dash's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of CN¥816.8m. And it impressed us with free cash flow of CN¥335m, being 252% of its EBIT. So is DPC Dash's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - DPC Dash has 1 warning sign we think you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.