Does China Oriented International Holdings (HKG:1871) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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 note that China Oriented International Holdings Limited (HKG:1871) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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.

How Much Debt Does China Oriented International Holdings Carry?

As you can see below, China Oriented International Holdings had CN¥43.2m of debt at June 2025, down from CN¥45.2m a year prior. However, it does have CN¥120.3m in cash offsetting this, leading to net cash of CN¥77.1m.

A Look At China Oriented International Holdings' Liabilities

The latest balance sheet data shows that China Oriented International Holdings had liabilities of CN¥72.1m due within a year, and liabilities of CN¥3.78m falling due after that. Offsetting this, it had CN¥120.3m in cash and CN¥1.08m in receivables that were due within 12 months. So it actually has CN¥45.5m more liquid assets than total liabilities.

This surplus strongly suggests that China Oriented International Holdings has a rock-solid balance sheet (and the debt is of no concern whatsoever). Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, China Oriented International Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is China Oriented International Holdings'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.

See our latest analysis for China Oriented International Holdings

In the last year China Oriented International Holdings had a loss before interest and tax, and actually shrunk its revenue by 9.8%, to CN¥31m. We would much prefer see growth.

So How Risky Is China Oriented International Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year China Oriented International Holdings had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through CN¥25m of cash and made a loss of CN¥11m. But the saving grace is the CN¥77.1m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. Case in point: We've spotted 3 warning signs for China Oriented International Holdings you should be aware of, and 1 of them shouldn't be ignored.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.