Is Media Chinese International (HKG:685) Using Debt In A Risky Way?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Media Chinese International Limited (HKG:685) makes use of debt. But is this debt a concern to shareholders?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

When Is Debt Dangerous?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Media Chinese International Carry?

As you can see below, at the end of June 2025, Media Chinese International had US$34.3m of debt, up from US$32.2m a year ago. Click the image for more detail. However, it does have US$106.3m in cash offsetting this, leading to net cash of US$72.0m.

A Look At Media Chinese International's Liabilities

According to the last reported balance sheet, Media Chinese International had liabilities of US$76.7m due within 12 months, and liabilities of US$5.54m due beyond 12 months. Offsetting this, it had US$106.3m in cash and US$22.6m in receivables that were due within 12 months. So it actually has US$46.7m more liquid assets than total liabilities.

This luscious liquidity implies that Media Chinese International's balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Media Chinese International 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 ultimately the future profitability of the business will decide if Media Chinese International can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for Media Chinese International

Over 12 months, Media Chinese International saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

So How Risky Is Media Chinese International?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Media Chinese International lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$10m and booked a US$8.5m accounting loss. But the saving grace is the US$72.0m on the balance sheet. That means it could keep spending at its current rate for more than two years. 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. Be aware that Media Chinese International is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.