Does ECA Integrated Solution Berhad (KLSE:ECA) 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. As with many other companies ECA Integrated Solution Berhad (KLSE:ECA) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. 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 ECA Integrated Solution Berhad Carry?

As you can see below, at the end of January 2025, ECA Integrated Solution Berhad had RM14.7m of debt, up from RM9.62m a year ago. Click the image for more detail. However, its balance sheet shows it holds RM24.8m in cash, so it actually has RM10.1m net cash.

How Strong Is ECA Integrated Solution Berhad's Balance Sheet?

We can see from the most recent balance sheet that ECA Integrated Solution Berhad had liabilities of RM7.36m falling due within a year, and liabilities of RM11.6m due beyond that. Offsetting this, it had RM24.8m in cash and RM12.4m in receivables that were due within 12 months. So it can boast RM18.2m more liquid assets than total liabilities.

This surplus suggests that ECA Integrated Solution Berhad is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that ECA Integrated Solution Berhad has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine ECA Integrated Solution Berhad'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 .

Check out our latest analysis for ECA Integrated Solution Berhad

Over 12 months, ECA Integrated Solution Berhad made a loss at the EBIT level, and saw its revenue drop to RM14m, which is a fall of 53%. To be frank that doesn't bode well.

So How Risky Is ECA Integrated Solution Berhad?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that ECA Integrated Solution Berhad had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through RM13m of cash and made a loss of RM14m. With only RM10.1m on the balance sheet, it would appear that its going to need to raise capital again soon. 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. For example - ECA Integrated Solution Berhad has 3 warning signs we think you should be aware of.

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.