Is Kronologi Asia Berhad (KLSE:KRONO) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Kronologi Asia Berhad (KLSE:KRONO) does carry debt. But the more important question is: how much risk is that debt creating?

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Why Does Debt Bring Risk?

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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Kronologi Asia Berhad Carry?

As you can see below, Kronologi Asia Berhad had RM10.0m of debt at July 2025, down from RM20.4m a year prior. But on the other hand it also has RM49.3m in cash, leading to a RM39.3m net cash position.

How Strong Is Kronologi Asia Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Kronologi Asia Berhad had liabilities of RM85.5m due within 12 months and liabilities of RM33.8m due beyond that. On the other hand, it had cash of RM49.3m and RM75.7m worth of receivables due within a year. So it can boast RM5.76m more liquid assets than total liabilities.

This surplus suggests that Kronologi Asia Berhad has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Kronologi Asia Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Kronologi Asia Berhad

Notably, Kronologi Asia Berhad's EBIT launched higher than Elon Musk, gaining a whopping 228% on last year. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Kronologi Asia Berhad 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Kronologi Asia 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. In the last three years, Kronologi Asia Berhad created free cash flow amounting to 6.9% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Kronologi Asia Berhad has net cash of RM39.3m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 228% over the last year. So we don't have any problem with Kronologi Asia Berhad's use of debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Kronologi Asia Berhad you should know about.

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.

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.