Is Jiangsu Broadcasting Cable Information Network (SHSE:600959) Weighed On By Its Debt Load?

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. We can see that Jiangsu Broadcasting Cable Information Network Corporation Limited (SHSE:600959) does use debt in its business. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

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. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Jiangsu Broadcasting Cable Information Network

What Is Jiangsu Broadcasting Cable Information Network's Debt?

The image below, which you can click on for greater detail, shows that at March 2024 Jiangsu Broadcasting Cable Information Network had debt of CN¥4.70b, up from CN¥3.98b in one year. But on the other hand it also has CN¥6.20b in cash, leading to a CN¥1.50b net cash position.

How Healthy Is Jiangsu Broadcasting Cable Information Network's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Jiangsu Broadcasting Cable Information Network had liabilities of CN¥13.5b due within 12 months and liabilities of CN¥1.25b due beyond that. On the other hand, it had cash of CN¥6.20b and CN¥1.56b worth of receivables due within a year. So it has liabilities totalling CN¥7.00b more than its cash and near-term receivables, combined.

Jiangsu Broadcasting Cable Information Network has a market capitalization of CN¥13.5b, 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! When analysing debt levels, the balance sheet is the obvious place to start. But it is Jiangsu Broadcasting Cable Information Network'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.

Over 12 months, Jiangsu Broadcasting Cable Information Network saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.

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¥316m. 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. 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. Case in point: We've spotted 3 warning signs for Jiangsu Broadcasting Cable Information Network you should be aware of, and 1 of them shouldn't be ignored.

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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com