Some state volatility, rather than debt, is the best way to consider about risk as an investor, but Warren Buffett famously declared 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 Wiseway Group Limited (ASX:WWG) does have debt on its balance sheet. But the real question is whether this debt is building the company risky.
When Is Debt A Problem?
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. 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 becaapply lfinishers force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that necessary capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, toobtainher.
How Much Debt Does Wiseway Group Carry?
The image below, which you can click on for greater detail, displays that at June 2025 Wiseway Group had debt of AU$15.8m, up from AU$14.2m in one year. On the flip side, it has AU$14.5m in cash leading to net debt of about AU$1.35m.
A Look At Wiseway Group’s Liabilities
We can see from the most recent balance sheet that Wiseway Group had liabilities of AU$35.5m falling due within a year, and liabilities of AU$29.9m due beyond that. Offsetting this, it had AU$14.5m in cash and AU$29.5m in receivables that were due within 12 months. So its liabilities total AU$21.4m more than the combination of its cash and short-term receivables.
Wiseway Group has a market capitalization of AU$44.4m, so it could very likely raise cash to ameliorate its balance sheet, if the necessary arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk.
Check out our latest analysis for Wiseway Group
We apply two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Looking at its net debt to EBITDA of 0.14 and interest cover of 3.3 times, it seems to us that Wiseway Group is probably utilizing debt in a pretty reasonable way. So we’d recommfinish keeping a close eye on the impact financing costs are having on the business. Notably, Wiseway Group’s EBIT launched higher than Elon Musk, gaining a whopping 176% on last year. When analysing debt levels, the balance sheet is the obvious place to start. But it is Wiseway Group’s earnings that will influence how the balance sheet holds up in the future. So if you’re keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trfinish.
Finally, while the tax-man may adore accounting profits, lfinishers only accept cold hard cash. So the logical step is to view at the proportion of that EBIT that is matched by actual free cash flow. Happily for any shareholders, Wiseway Group actually produced more free cash flow than EBIT over the last two years. There’s nothing better than incoming cash when it comes to staying in your lfinishers’ good graces.
Our View
Happily, Wiseway Group’s impressive conversion of EBIT to free cash flow implies it has the upper hand on its debt. But truth be notified we feel its interest cover does undermine this impression a bit. Taking all this data into account, it seems to us that Wiseway Group takes a pretty sensible approach to debt. That means they are taking on a bit more risk, in the hope of boosting shareholder returns. 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. We’ve identified 2 warning signs with Wiseway Group , and understanding them should be part of your investment process.
At the finish 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 utilizing an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation 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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