Health Check: How Prudently Does T4F Entretenimento (BVMF:SHOW3) Use Debt?

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. Importantly, T4F Entretenimento S.A. (BVMF:SHOW3) does carry debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does T4F Entretenimento Carry?

You can click the graphic below for the historical numbers, but it shows that T4F Entretenimento had R$55.5m of debt in September 2025, down from R$65.8m, one year before. However, its balance sheet shows it holds R$114.7m in cash, so it actually has R$59.2m net cash.

How Healthy Is T4F Entretenimento's Balance Sheet?

The latest balance sheet data shows that T4F Entretenimento had liabilities of R$192.8m due within a year, and liabilities of R$99.2m falling due after that. Offsetting this, it had R$114.7m in cash and R$111.2m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by R$66.1m.

When you consider that this deficiency exceeds the company's R$45.2m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. T4F Entretenimento boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total. The balance sheet is clearly the area to focus on when you are analysing debt. But it is T4F Entretenimento's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for T4F Entretenimento

Over 12 months, T4F Entretenimento made a loss at the EBIT level, and saw its revenue drop to R$148m, which is a fall of 68%. To be frank that doesn't bode well.

So How Risky Is T4F Entretenimento?

Although T4F Entretenimento had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of R$22m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We're not impressed by its revenue growth, so until we see some positive sustainable EBIT, we consider the stock to be high risk. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 2 warning signs for T4F Entretenimento (1 is a bit concerning!) that you should be aware of before investing here.

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.

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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.