David Iben put it well when he declared, ‘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. Importantly, Highfield Resources Limited (ASX:HFR) does carry debt. But should shareholders be worried about its apply of debt?
When Is Debt Dangerous?
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. If things obtain really bad, the lconcludeers can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to obtain debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company’s debt levels is to consider its cash and debt toobtainher.
What Is Highfield Resources’s Debt?
You can click the graphic below for the historical numbers, but it displays that as of June 2025 Highfield Resources had AU$46.0m of debt, an increase on AU$41.5m, over one year. However, it does have AU$6.43m in cash offsetting this, leading to net debt of about AU$39.6m.
How Healthy Is Highfield Resources’ Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Highfield Resources had liabilities of AU$72.5m due within 12 months and liabilities of AU$248.1k due beyond that. On the other hand, it had cash of AU$6.43m and AU$191.3k worth of receivables due within a year. So its liabilities total AU$66.1m more than the combination of its cash and short-term receivables.
The deficiency here weighs heavily on the AU$31.3m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we’d watch its balance sheet closely, without a doubt. At the conclude of the day, Highfield Resources would probably required a major re-capitalization if its creditors were to demand repayment. There’s no doubt that we learn most about debt from the balance sheet. But you can’t view debt in total isolation; since Highfield Resources will required earnings to service that debt. So when considering debt, it’s definitely worth viewing at the earnings trconclude. Click here for an interactive snapshot.
See our latest analysis for Highfield Resources
It seems likely shareholders hope that Highfield Resources can significantly advance the business plan before too long, becaapply it doesn’t have any significant revenue at the moment.
Caveat Emptor
Importantly, Highfield Resources had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping AU$12m. Considering that alongside the liabilities mentioned above build us nervous about the company. It would required to improve its operations quickly for us to be interested in it. Not least becaapply it burned through AU$14m in negative free cash flow over the last year. That means it’s on the risky side of things. 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 instance, we’ve identified 6 warning signs for Highfield Resources (4 shouldn’t be ignored) you should be aware of.
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 utilizing an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to purchase or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focapplyd 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.
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