Does Future FinTech Group (NASDAQ:FTFT) Have A Healthy Balance Sheet?

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.' 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 can see that Future FinTech Group Inc. (NASDAQ:FTFT) does use debt in its business. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Future FinTech Group

What Is Future FinTech Group's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2022 Future FinTech Group had US$4.84m of debt, an increase on US$494.6k, over one year. But it also has US$55.4m in cash to offset that, meaning it has US$50.6m net cash.

How Healthy Is Future FinTech Group's Balance Sheet?

The latest balance sheet data shows that Future FinTech Group had liabilities of US$10.2m due within a year, and liabilities of US$3.66m falling due after that. Offsetting this, it had US$55.4m in cash and US$15.5m in receivables that were due within 12 months. So it can boast US$57.1m more liquid assets than total liabilities.

This excess liquidity is a great indication that Future FinTech Group's balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Future FinTech Group has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Future FinTech Group 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.

In the last year Future FinTech Group wasn't profitable at an EBIT level, but managed to grow its revenue by 16,073%, to US$29m. That's virtually the hole-in-one of revenue growth!

So How Risky Is Future FinTech Group?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Future FinTech Group had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$19m of cash and made a loss of US$13m. With only US$50.6m on the balance sheet, it would appear that its going to need to raise capital again soon. Importantly, Future FinTech Group's revenue growth is hot to trot. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for Future FinTech Group 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.