The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says '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. Importantly, Bitdeer Technologies Group (NASDAQ:BTDR) does carry debt. But is this debt a concern to shareholders?

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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Bitdeer Technologies Group's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2024 Bitdeer Technologies Group had debt of US$37.8m, up from US$30.0m in one year. But on the other hand it also has US$245.6m in cash, leading to a US$207.8m net cash position.

A Look At Bitdeer Technologies Group's Liabilities

The latest balance sheet data shows that Bitdeer Technologies Group had liabilities of US$46.2m due within a year, and liabilities of US$302.2m falling due after that. Offsetting these obligations, it had cash of US$245.6m as well as receivables valued at US$25.6m due within 12 months. So its liabilities total US$77.1m more than the combination of its cash and short-term receivables.

Of course, Bitdeer Technologies Group has a market capitalization of US$946.0m, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Bitdeer Technologies Group also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Bitdeer Technologies Group's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, Bitdeer Technologies Group reported revenue of US$421m, which is a gain of 31%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Bitdeer Technologies Group?

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 Bitdeer Technologies Group lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$409m and booked a US$24m accounting loss. With only US$207.8m on the balance sheet, it would appear that its going to need to raise capital again soon. With very solid revenue growth in the last year, Bitdeer Technologies Group may be on a path to profitability. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with Bitdeer Technologies Group (including 1 which is concerning) .

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.