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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Jiangsu Broadcasting Cable Information Network Corporation Limited (SHSE:600959) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for Jiangsu Broadcasting Cable Information Network

What Is Jiangsu Broadcasting Cable Information Network's Net Debt?

The image below, which you can click on for greater detail, shows that Jiangsu Broadcasting Cable Information Network had debt of CN¥2.16b at the end of September 2024, a reduction from CN¥3.86b over a year. However, its balance sheet shows it holds CN¥6.27b in cash, so it actually has CN¥4.11b net cash.

How Strong 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¥12.2b due within 12 months and liabilities of CN¥1.76b due beyond that. On the other hand, it had cash of CN¥6.27b and CN¥1.78b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by CN¥5.95b.

Jiangsu Broadcasting Cable Information Network has a market capitalization of CN¥18.1b, 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. While it does have liabilities worth noting, Jiangsu Broadcasting Cable Information Network also has more cash than debt, so we're pretty confident it can manage its debt safely. 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.

Over 12 months, Jiangsu Broadcasting Cable Information Network reported revenue of CN¥7.8b, which is a gain of 4.3%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Jiangsu Broadcasting Cable Information Network?

While Jiangsu Broadcasting Cable Information Network lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of CN¥300m. So taking that on face value, and considering the cash, we don't think its very risky in the near 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. We've identified 2 warning signs with Jiangsu Broadcasting Cable Information Network , and understanding them should be part of your investment process.

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.