Fujisan Magazine Service (TSE:3138) Has A Pretty Healthy Balance Sheet
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. As with many other companies Fujisan Magazine Service Co., Ltd. (TSE:3138) 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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.
What Is Fujisan Magazine Service's Debt?
The chart below, which you can click on for greater detail, shows that Fujisan Magazine Service had JP¥560.0m in debt in September 2025; about the same as the year before. However, its balance sheet shows it holds JP¥2.86b in cash, so it actually has JP¥2.30b net cash.
A Look At Fujisan Magazine Service's Liabilities
According to the last reported balance sheet, Fujisan Magazine Service had liabilities of JP¥3.01b due within 12 months, and liabilities of JP¥22.0m due beyond 12 months. Offsetting these obligations, it had cash of JP¥2.86b as well as receivables valued at JP¥1.60b due within 12 months. So it can boast JP¥1.43b more liquid assets than total liabilities.
This surplus strongly suggests that Fujisan Magazine Service 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, Fujisan Magazine Service boasts net cash, so it's fair to say it does not have a heavy debt load!
Check out our latest analysis for Fujisan Magazine Service
It is just as well that Fujisan Magazine Service's load is not too heavy, because its EBIT was down 53% over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Fujisan Magazine Service will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Fujisan Magazine Service 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. In the last three years, Fujisan Magazine Service created free cash flow amounting to 8.6% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.
Summing Up
While it is always sensible to investigate a company's debt, in this case Fujisan Magazine Service has JP¥2.30b in net cash and a decent-looking balance sheet. So we are not troubled with Fujisan Magazine Service's debt use. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 4 warning signs we've spotted with Fujisan Magazine Service (including 1 which is potentially serious) .
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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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.