We Think V.S. Industry Berhad (KLSE:VS) Can Stay On Top Of Its 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. We can see that V.S. Industry Berhad (KLSE:VS) does use debt in its business. But is this debt a concern to shareholders?

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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. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is V.S. Industry Berhad's Debt?

The image below, which you can click on for greater detail, shows that V.S. Industry Berhad had debt of RM786.5m at the end of July 2025, a reduction from RM907.5m over a year. However, its balance sheet shows it holds RM858.9m in cash, so it actually has RM72.4m net cash.

How Healthy Is V.S. Industry Berhad's Balance Sheet?

The latest balance sheet data shows that V.S. Industry Berhad had liabilities of RM1.16b due within a year, and liabilities of RM417.9m falling due after that. Offsetting these obligations, it had cash of RM858.9m as well as receivables valued at RM1.21b due within 12 months. So it can boast RM497.3m more liquid assets than total liabilities.

This surplus suggests that V.S. Industry 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. Succinctly put, V.S. Industry Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for V.S. Industry Berhad

Shareholders should be aware that V.S. Industry Berhad's EBIT was down 67% last year. If that earnings trend continues then paying off its debt will be about as easy as herding cats on to a roller coaster. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if V.S. Industry Berhad can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While V.S. Industry Berhad has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, V.S. Industry Berhad actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that V.S. Industry Berhad has net cash of RM72.4m, as well as more liquid assets than liabilities. And it impressed us with free cash flow of RM342m, being 119% of its EBIT. So we are not troubled with V.S. Industry Berhad's debt use. 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 instance, we've identified 1 warning sign for V.S. Industry Berhad that 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.