Is Grand Banks Yachts (SGX:G50) A Risky Investment?

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 Grand Banks Yachts Limited (SGX:G50) does use debt in its business. But the more important question is: how much risk is that debt creating?We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Why Does Debt Bring Risk? 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. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together. What Is Grand Banks Yachts's Net Debt? As you can see below, at the end of June 2025, Grand Banks Yachts had S$28.1m of debt, up from S$5.54m a year ago. Click the image for more detail. However, its balance sheet shows it holds S$51.5m in cash, so it actually has S$23.5m net cash. SGX:G50 Debt to Equity History August 29th 2025 How Strong Is Grand Banks Yachts' Balance Sheet? Zooming in on the latest balance sheet data, we can see that Grand Banks Yachts had liabilities of S$53.1m due within 12 months and liabilities of S$24.3m due beyond that. On the other hand, it had cash of S$51.5m and S$11.9m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by S$14.1m. Of course, Grand Banks Yachts has a market capitalization of S$108.2m, so these liabilities are probably manageable. 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, Grand Banks Yachts also has more cash than debt, so we're pretty confident it can manage its debt safely. See our latest analysis for Grand Banks Yachts But the bad news is that Grand Banks Yachts has seen its EBIT plunge 16% in the last twelve months. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Grand Banks Yachts 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. Finally, a company can only pay off debt with cold hard cash, not accounting profits. Grand Banks Yachts may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Looking at the most recent three years, Grand Banks Yachts recorded free cash flow of 37% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt. Summing Up Although Grand Banks Yachts's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of S$23.5m. So we don't have any problem with Grand Banks Yachts's use of debt. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with Grand Banks Yachts , and understanding them should be part of your investment process. If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.