Health Check: How Prudently Does Beijing Sports and Entertainment Industry Group (HKG:1803) Use Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Beijing Sports and Entertainment Industry Group Limited (HKG:1803) does use debt in its business. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Beijing Sports and Entertainment Industry Group's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Beijing Sports and Entertainment Industry Group had HK$77.8m of debt, an increase on HK$45.2m, over one year. However, it does have HK$93.6m in cash offsetting this, leading to net cash of HK$15.8m.

A Look At Beijing Sports and Entertainment Industry Group's Liabilities

The latest balance sheet data shows that Beijing Sports and Entertainment Industry Group had liabilities of HK$272.2m due within a year, and liabilities of HK$5.96m falling due after that. On the other hand, it had cash of HK$93.6m and HK$75.6m worth of receivables due within a year. So its liabilities total HK$108.9m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of HK$167.6m, so it does suggest shareholders should keep an eye on Beijing Sports and Entertainment Industry Group's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. Despite its noteworthy liabilities, Beijing Sports and Entertainment Industry Group boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Beijing Sports and Entertainment Industry Group 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 Beijing Sports and Entertainment Industry Group

In the last year Beijing Sports and Entertainment Industry Group wasn't profitable at an EBIT level, but managed to grow its revenue by 157%, to HK$185m. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is Beijing Sports and Entertainment Industry Group?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Beijing Sports and Entertainment Industry Group had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through HK$59m of cash and made a loss of HK$27m. But at least it has HK$15.8m on the balance sheet to spend on growth, near-term. Importantly, Beijing Sports and Entertainment Industry Group's revenue growth is hot to trot. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 3 warning signs for Beijing Sports and Entertainment Industry Group (1 shouldn't be ignored!) that you should be aware of before investing here.

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.