Does Fujian Foxit Software Development (SHSE:688095) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Fujian Foxit Software Development Joint Stock Co., Ltd. (SHSE:688095) does have debt on its balance sheet. But is this debt a concern to shareholders?

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Fujian Foxit Software Development

What Is Fujian Foxit Software Development's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2024 Fujian Foxit Software Development had debt of CN¥42.3m, up from none in one year. But on the other hand it also has CN¥1.97b in cash, leading to a CN¥1.92b net cash position.

A Look At Fujian Foxit Software Development's Liabilities

Zooming in on the latest balance sheet data, we can see that Fujian Foxit Software Development had liabilities of CN¥473.7m due within 12 months and liabilities of CN¥37.2m due beyond that. Offsetting this, it had CN¥1.97b in cash and CN¥110.3m in receivables that were due within 12 months. So it can boast CN¥1.57b more liquid assets than total liabilities.

It's good to see that Fujian Foxit Software Development has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Fujian Foxit Software Development 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 ultimately the future profitability of the business will decide if Fujian Foxit Software Development can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Fujian Foxit Software Development wasn't profitable at an EBIT level, but managed to grow its revenue by 14%, to CN¥677m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Fujian Foxit Software Development?

Although Fujian Foxit Software Development had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of CN¥9.1m. 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. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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. Case in point: We've spotted 3 warning signs for Fujian Foxit Software Development you should be aware of, and 2 of them are a bit concerning.

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.