Would GVA TECHInc (TSE:298A) Be Better Off With Less Debt?

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. As with many other companies GVA TECH,Inc. (TSE:298A) makes use of debt. But is this debt a concern to shareholders?

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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. 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, debt can be an important tool in businesses, particularly capital heavy businesses. 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 GVA TECHInc Carry?

You can click the graphic below for the historical numbers, but it shows that GVA TECHInc had JP¥366.9m of debt in June 2025, down from JP¥457.6m, one year before. However, it also had JP¥312.9m in cash, and so its net debt is JP¥54.0m.

How Strong Is GVA TECHInc's Balance Sheet?

According to the last reported balance sheet, GVA TECHInc had liabilities of JP¥511.7m due within 12 months, and liabilities of JP¥246.3m due beyond 12 months. On the other hand, it had cash of JP¥312.9m and JP¥85.8m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥359.3m.

Given GVA TECHInc has a market capitalization of JP¥3.61b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. But either way, GVA TECHInc has virtually no net debt, 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 GVA TECHInc will need earnings to service that debt. 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.

View our latest analysis for GVA TECHInc

Over 12 months, GVA TECHInc reported revenue of JP¥1.4b, which is a gain of 51%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, GVA TECHInc still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping JP¥433m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled JP¥652m in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. Case in point: We've spotted 3 warning signs for GVA TECHInc you should be aware of, and 2 of them can'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.