Ecoscience International Berhad (KLSE:EIB) Is Making Moderate Use Of Debt

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.' 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 Ecoscience International Berhad (KLSE:EIB) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. 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 Ecoscience International Berhad Carry?

The image below, which you can click on for greater detail, shows that at September 2025 Ecoscience International Berhad had debt of RM64.1m, up from RM59.1m in one year. However, it also had RM15.6m in cash, and so its net debt is RM48.5m.

A Look At Ecoscience International Berhad's Liabilities

Zooming in on the latest balance sheet data, we can see that Ecoscience International Berhad had liabilities of RM96.0m due within 12 months and liabilities of RM9.09m due beyond that. Offsetting this, it had RM15.6m in cash and RM95.2m in receivables that were due within 12 months. So it can boast RM5.70m more liquid assets than total liabilities.

This short term liquidity is a sign that Ecoscience International Berhad could probably pay off its debt with ease, as its balance sheet is far from stretched. When analysing debt levels, the balance sheet is the obvious place to start. But it is Ecoscience International Berhad's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Ecoscience International Berhad

Over 12 months, Ecoscience International Berhad made a loss at the EBIT level, and saw its revenue drop to RM132m, which is a fall of 3.2%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Ecoscience International Berhad produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at RM5.1m. On a more positive note, the company does have liquid assets, so it has a bit of time to improve its operations before the debt becomes an acute problem. Still, we'd be more encouraged to study the business in depth if it already had some free cash flow. This one is a bit too risky for our liking. 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. To that end, you should learn about the 3 warning signs we've spotted with Ecoscience International Berhad (including 2 which shouldn't be ignored) .

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.