Warren Buffett famously said, '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. As with many other companies Genting Singapore Limited (SGX:G13) makes use of debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Genting Singapore

What Is Genting Singapore's Debt?

You can click the graphic below for the historical numbers, but it shows that Genting Singapore had S$255.3m of debt in September 2019, down from S$1.03b, one year before. However, its balance sheet shows it holds S$3.68b in cash, so it actually has S$3.42b net cash.

How Strong Is Genting Singapore's Balance Sheet?

The latest balance sheet data shows that Genting Singapore had liabilities of S$605.4m due within a year, and liabilities of S$535.0m falling due after that. Offsetting this, it had S$3.68b in cash and S$139.3m in receivables that were due within 12 months. So it actually has S$2.68b more liquid assets than total liabilities.

It's good to see that Genting Singapore has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Genting Singapore boasts net cash, so it's fair to say it does not have a heavy debt load!

On the other hand, Genting Singapore's EBIT dived 11%, over the last year. If that rate of decline in earnings continues, the company could find itself in a tight spot. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Genting Singapore's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.