Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Tarsus Pharmaceuticals, Inc. (NASDAQ:TARS) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

What Is Tarsus Pharmaceuticals's Debt?

As you can see below, Tarsus Pharmaceuticals had US$72.3m of debt, at September 2025, 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$401.8m in cash, so it actually has US$329.6m net cash.

How Strong Is Tarsus Pharmaceuticals' Balance Sheet?

We can see from the most recent balance sheet that Tarsus Pharmaceuticals had liabilities of US$117.1m falling due within a year, and liabilities of US$82.4m due beyond that. Offsetting these obligations, it had cash of US$401.8m as well as receivables valued at US$74.3m due within 12 months. So it can boast US$276.7m more liquid assets than total liabilities.

This surplus suggests that Tarsus Pharmaceuticals has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Tarsus Pharmaceuticals 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 it is future earnings, more than anything, that will determine Tarsus Pharmaceuticals'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.

In the last year Tarsus Pharmaceuticals wasn't profitable at an EBIT level, but managed to grow its revenue by 182%, to US$366m. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is Tarsus Pharmaceuticals?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Tarsus Pharmaceuticals had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$63m and booked a US$81m accounting loss. But the saving grace is the US$329.6m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. The good news for shareholders is that Tarsus Pharmaceuticals has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. When I consider a company to be a bit risky, I think it is responsible to check out whether insiders have been reporting any share sales. Luckily, you can click here ito see our graphic depicting Tarsus Pharmaceuticals insider transactions.

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.

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.