Does Wing Chi Holdings (HKG:6080) 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Wing Chi Holdings Limited (HKG:6080) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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.

How Much Debt Does Wing Chi Holdings Carry?

As you can see below, Wing Chi Holdings had HK$25.3m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. But it also has HK$50.3m in cash to offset that, meaning it has HK$25.0m net cash.

How Healthy Is Wing Chi Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Wing Chi Holdings had liabilities of HK$128.2m due within 12 months and liabilities of HK$6.21m due beyond that. On the other hand, it had cash of HK$50.3m and HK$155.0m worth of receivables due within a year. So it actually has HK$70.9m more liquid assets than total liabilities.

This surplus liquidity suggests that Wing Chi Holdings' balance sheet could take a hit just as well as Homer Simpson's head can take a punch. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Wing Chi Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is Wing Chi Holdings'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.

View our latest analysis for Wing Chi Holdings

In the last year Wing Chi Holdings had a loss before interest and tax, and actually shrunk its revenue by 9.8%, to HK$737m. That's not what we would hope to see.

So How Risky Is Wing Chi Holdings?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Wing Chi Holdings lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of HK$20m and booked a HK$13m accounting loss. With only HK$25.0m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example - Wing Chi Holdings has 2 warning signs we think 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.