Is Jiangsu Broadcasting Cable Information Network (SHSE:600959) A Risky Investment?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 note that Jiangsu Broadcasting Cable Information Network Corporation Limited (SHSE:600959) does have debt on its balance sheet. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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 step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Jiangsu Broadcasting Cable Information Network

What Is Jiangsu Broadcasting Cable Information Network's Debt?

As you can see below, Jiangsu Broadcasting Cable Information Network had CN¥3.86b of debt, at September 2023, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has CN¥5.13b in cash, leading to a CN¥1.28b net cash position.

A Look At Jiangsu Broadcasting Cable Information Network's Liabilities

The latest balance sheet data shows that Jiangsu Broadcasting Cable Information Network had liabilities of CN¥13.4b due within a year, and liabilities of CN¥737.7m falling due after that. Offsetting this, it had CN¥5.13b in cash and CN¥1.71b in receivables that were due within 12 months. So its liabilities total CN¥7.32b more than the combination of its cash and short-term receivables.

Jiangsu Broadcasting Cable Information Network has a market capitalization of CN¥15.9b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. Despite its noteworthy liabilities, Jiangsu Broadcasting Cable Information Network 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 you can't view debt in total isolation; since Jiangsu Broadcasting Cable Information Network will need earnings to service that debt. 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.

In the last year Jiangsu Broadcasting Cable Information Network's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

So How Risky Is Jiangsu Broadcasting Cable Information Network?

Although Jiangsu Broadcasting Cable Information Network had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of CN¥336m. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Jiangsu Broadcasting Cable Information Network (of which 1 shouldn't be ignored!) you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.