Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Net 1 UEPS Technologies, Inc. (NASDAQ:UEPS) makes use of debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. 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 Net 1 UEPS Technologies

How Much Debt Does Net 1 UEPS Technologies Carry?

As you can see below, Net 1 UEPS Technologies had US$14.2m of debt, at June 2021, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds US$198.6m in cash, so it actually has US$184.3m net cash.

A Look At Net 1 UEPS Technologies' Liabilities

We can see from the most recent balance sheet that Net 1 UEPS Technologies had liabilities of US$52.5m falling due within a year, and liabilities of US$99.9m due beyond that. Offsetting these obligations, it had cash of US$198.6m as well as receivables valued at US$47.7m due within 12 months. So it actually has US$93.9m more liquid assets than total liabilities.

This surplus strongly suggests that Net 1 UEPS Technologies has a rock-solid balance sheet (and the debt is of no concern whatsoever). With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Net 1 UEPS Technologies 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 Net 1 UEPS Technologies 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.