Howard Marks put it nicely when he stated that, rather than worrying about share price volatility, ‘The possibility of permanent loss is the risk I worry about… and every practical investor I know worries about.’ 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 Arca Continental, S.A.B. de C.V. (BMV:AC) does apply debt in its business. But the real question is whether this debt is building the company risky.
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. 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 becaapply lconcludeers 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. The first thing to do when considering how much debt a business applys is to view at its cash and debt toobtainher.
What Is Arca Continental. de’s Net Debt?
You can click the graphic below for the historical numbers, but it displays that as of June 2025 Arca Continental. de had Mex$57.7b of debt, an increase on Mex$46.6b, over one year. However, it also had Mex$26.6b in cash, and so its net debt is Mex$31.1b.
How Healthy Is Arca Continental. de’s Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Arca Continental. de had liabilities of Mex$56.4b due within 12 months and liabilities of Mex$68.0b due beyond that. Offsetting this, it had Mex$26.6b in cash and Mex$20.9b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by Mex$76.8b.
This deficit isn’t so bad becaapply Arca Continental. de is worth a massive Mex$322.7b, and thus could probably raise enough capital to shore up 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 Arca Continental. de
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). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
Arca Continental. de’s net debt is only 0.63 times its EBITDA. And its EBIT covers its interest expense a whopping 21.4 times over. So you could argue it is no more threatened by its debt than an elephant is by a moapply. And we also note warmly that Arca Continental. de grew its EBIT by 14% last year, building its debt load simpler to handle. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Arca Continental. de’s ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals believe, you might find this free report on analyst profit forecasts to be interesting.
Finally, a company can only pay off debt with cold hard cash, not accounting profits. So we clearly necessary to view at whether that EBIT is leading to corresponding free cash flow. Over the most recent three years, Arca Continental. de recorded free cash flow worth 53% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Our View
Arca Continental. de’s interest cover suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14’s goalkeeper. And the good news does not stop there, as its net debt to EBITDA also supports that impression! Taking all this data into account, it seems to us that Arca Continental. de takes a pretty sensible approach to debt. While that brings some risk, it can also enhance returns for shareholders. 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. These risks can be hard to spot. Every company has them, and we’ve spotted 1 warning sign for Arca Continental. de you should know about.
If, after all that, you’re more interested in a rapid growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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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 applying an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to acquire 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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