These 4 Measures Indicate That Zaklad Budowy Maszyn ZREMB - Chojnice (WSE:ZRE) Is Using Debt Reasonably Well
Warren Buffett famously said, '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 Zaklad Budowy Maszyn ZREMB - Chojnice S.A. (WSE:ZRE) does use debt in its business. But is this debt a concern to shareholders?
When Is Debt Dangerous?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is Zaklad Budowy Maszyn ZREMB - Chojnice's Debt?
As you can see below, Zaklad Budowy Maszyn ZREMB - Chojnice had zł5.55m of debt at September 2025, down from zł5.92m a year prior. However, it also had zł597.0k in cash, and so its net debt is zł4.95m.
How Healthy Is Zaklad Budowy Maszyn ZREMB - Chojnice's Balance Sheet?
According to the last reported balance sheet, Zaklad Budowy Maszyn ZREMB - Chojnice had liabilities of zł12.5m due within 12 months, and liabilities of zł10.9m due beyond 12 months. Offsetting these obligations, it had cash of zł597.0k as well as receivables valued at zł5.38m due within 12 months. So it has liabilities totalling zł17.5m more than its cash and near-term receivables, combined.
Since publicly traded Zaklad Budowy Maszyn ZREMB - Chojnice shares are worth a total of zł113.7m, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time.
See our latest analysis for Zaklad Budowy Maszyn ZREMB - Chojnice
We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
Zaklad Budowy Maszyn ZREMB - Chojnice has a low debt to EBITDA ratio of only 0.77. And remarkably, despite having net debt, it actually received more in interest over the last twelve months than it had to pay. So it's fair to say it can handle debt like a hotshot teppanyaki chef handles cooking. On the other hand, Zaklad Budowy Maszyn ZREMB - Chojnice saw its EBIT drop by 6.1% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. When analysing debt levels, the balance sheet is the obvious place to start. But it is Zaklad Budowy Maszyn ZREMB - Chojnice's earnings that will influence how the balance sheet holds up in the future. 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. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. During the last three years, Zaklad Budowy Maszyn ZREMB - Chojnice produced sturdy free cash flow equating to 70% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Our View
The good news is that Zaklad Budowy Maszyn ZREMB - Chojnice's demonstrated ability to cover its interest expense with its EBIT delights us like a fluffy puppy does a toddler. But, on a more sombre note, we are a little concerned by its EBIT growth rate. Taking all this data into account, it seems to us that Zaklad Budowy Maszyn ZREMB - Chojnice takes a pretty sensible approach to debt. That means they are taking on a bit more risk, in the hope of boosting shareholder returns. 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. For example, we've discovered 2 warning signs for Zaklad Budowy Maszyn ZREMB - Chojnice (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
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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.