Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 note that Greenbrook TMS Inc. (TSE:GTMS) does have debt on its balance sheet. But is this debt a concern to shareholders?

Why Does Debt Bring Risk?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Greenbrook TMS

How Much Debt Does Greenbrook TMS Carry?

As you can see below, at the end of September 2020, Greenbrook TMS had US$3.07m of debt, up from US$337.8k a year ago. Click the image for more detail. However, its balance sheet shows it holds US$9.17m in cash, so it actually has US$6.10m net cash.

How Strong Is Greenbrook TMS' Balance Sheet?

We can see from the most recent balance sheet that Greenbrook TMS had liabilities of US$25.7m falling due within a year, and liabilities of US$23.4m due beyond that. Offsetting this, it had US$9.17m in cash and US$12.2m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$27.7m.

Since publicly traded Greenbrook TMS shares are worth a total of US$220.6m, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Greenbrook TMS also has more cash than debt, so we're pretty confident it can manage its debt safely. 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 Greenbrook TMS'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.