David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. As with many other companies Starz Entertainment Corp. (NASDAQ:STRZ) makes use of debt. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Starz Entertainment Carry?

You can click the graphic below for the historical numbers, but it shows that Starz Entertainment had US$700.7m of debt in September 2025, down from US$766.1m, one year before. However, it also had US$37.0m in cash, and so its net debt is US$663.7m.

A Look At Starz Entertainment's Liabilities

We can see from the most recent balance sheet that Starz Entertainment had liabilities of US$599.8m falling due within a year, and liabilities of US$709.4m due beyond that. On the other hand, it had cash of US$37.0m and US$65.5m worth of receivables due within a year. So its liabilities total US$1.21b more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the US$150.7m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Starz Entertainment would likely require a major re-capitalisation if it had to pay its creditors today. 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 Starz Entertainment's ability to maintain a healthy balance sheet going forward.

In the last year Starz Entertainment had a loss before interest and tax, and actually shrunk its revenue by 5.8%, to US$1.3b. We would much prefer see growth.

Caveat Emptor

Importantly, Starz Entertainment had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable US$31m at the EBIT level. Reflecting on this and the significant total liabilities, it's hard to know what to say about the stock because of our intense dis-affinity for it. Like every long-shot we're sure it has a glossy presentation outlining its blue-sky potential. But the reality is that it is low on liquid assets relative to liabilities, and it burned through US$2.4m in the last year. So is this a high risk stock? We think so, and we'd avoid it. 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. We've identified 2 warning signs with Starz Entertainment , and understanding them should be part of your investment process.

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.