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Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. As with many other companies Aspira Women's Health Inc. (NASDAQ:AWH) makes use of debt. But the more important question is: how much risk is that debt creating?
Why Does Debt Bring Risk?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
View our latest analysis for Aspira Women's Health
How Much Debt Does Aspira Women's Health Carry?
You can click the graphic below for the historical numbers, but it shows that as of March 2021 Aspira Women's Health had US$4.48m of debt, an increase on US$1.24m, over one year. However, it does have US$59.4m in cash offsetting this, leading to net cash of US$54.9m.
How Strong Is Aspira Women's Health's Balance Sheet?
We can see from the most recent balance sheet that Aspira Women's Health had liabilities of US$6.15m falling due within a year, and liabilities of US$3.82m due beyond that. Offsetting this, it had US$59.4m in cash and US$952.0k in receivables that were due within 12 months. So it can boast US$50.3m more liquid assets than total liabilities.
This surplus suggests that Aspira Women's Health has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Aspira Women's Health 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 ultimately the future profitability of the business will decide if Aspira Women's Health can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.