Health Check: How Prudently Does Unisound AI Technology (HKG:9678) Use Debt?

Howard Marks put it nicely when he said 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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Unisound AI Technology Co., Ltd. (HKG:9678) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Unisound AI Technology Carry?

You can click the graphic below for the historical numbers, but it shows that Unisound AI Technology had CN¥169.7m of debt in June 2025, down from CN¥3.11b, one year before. However, it does have CN¥241.7m in cash offsetting this, leading to net cash of CN¥72.0m.

How Healthy Is Unisound AI Technology's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Unisound AI Technology had liabilities of CN¥566.0m due within 12 months and liabilities of CN¥46.6m due beyond that. Offsetting this, it had CN¥241.7m in cash and CN¥709.2m in receivables that were due within 12 months. So it can boast CN¥338.3m more liquid assets than total liabilities.

This surplus suggests that Unisound AI Technology has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Unisound AI Technology 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 it is Unisound AI Technology'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 trend.

See our latest analysis for Unisound AI Technology

In the last year Unisound AI Technology wasn't profitable at an EBIT level, but managed to grow its revenue by 21%, to CN¥1.0b. With any luck the company will be able to grow its way to profitability.

So How Risky Is Unisound AI Technology?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Unisound AI Technology lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of CN¥196m and booked a CN¥494m accounting loss. But at least it has CN¥72.0m on the balance sheet to spend on growth, near-term. Unisound AI Technology's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. For riskier companies like Unisound AI Technology I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.