These 4 Measures Indicate That TT Vision Holdings Berhad (KLSE:TTVHB) Is Using Debt Reasonably Well

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 TT Vision Holdings Berhad (KLSE:TTVHB) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is TT Vision Holdings Berhad's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 TT Vision Holdings Berhad had debt of RM9.69m, up from none in one year. However, its balance sheet shows it holds RM37.2m in cash, so it actually has RM27.5m net cash.

How Healthy Is TT Vision Holdings Berhad's Balance Sheet?

According to the last reported balance sheet, TT Vision Holdings Berhad had liabilities of RM11.4m due within 12 months, and liabilities of RM17.3m due beyond 12 months. Offsetting this, it had RM37.2m in cash and RM37.0m in receivables that were due within 12 months. So it can boast RM45.6m more liquid assets than total liabilities.

It's good to see that TT Vision Holdings Berhad has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that TT Vision Holdings Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for TT Vision Holdings Berhad

The modesty of its debt load may become crucial for TT Vision Holdings Berhad if management cannot prevent a repeat of the 92% cut to EBIT over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since TT Vision Holdings Berhad will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. TT Vision Holdings Berhad may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, TT Vision Holdings Berhad saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case TT Vision Holdings Berhad has RM27.5m in net cash and a decent-looking balance sheet. So we are not troubled with TT Vision Holdings Berhad's debt use. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 3 warning signs for TT Vision Holdings Berhad that you should be aware of before investing here.

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.