Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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 can see that IMAC Holdings, Inc. (NASDAQ:IMAC) does use debt in its business. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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.

View our latest analysis for IMAC Holdings

What Is IMAC Holdings's Debt?

As you can see below, IMAC Holdings had US$3.68m of debt at June 2019, down from US$4.13m a year prior. However, it also had US$2.23m in cash, and so its net debt is US$1.45m.

How Strong Is IMAC Holdings's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that IMAC Holdings had liabilities of US$6.15m due within 12 months and liabilities of US$6.97m due beyond that. Offsetting this, it had US$2.23m in cash and US$1.10m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$9.79m.

While this might seem like a lot, it is not so bad since IMAC Holdings has a market capitalization of US$18.0m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since IMAC Holdings will need earnings to service that debt. 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.

Over 12 months, IMAC Holdings reported revenue of US$12m, which is a gain of 686%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!