These 4 Measures Indicate That Atresmedia Corporación de Medios de Comunicación (BME:A3M) Is Using Debt Reasonably Well

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. Importantly, Atresmedia Corporación de Medios de Comunicación, S.A. (BME:A3M) does carry debt. But the real question is whether this debt is making the company risky.

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Atresmedia Corporación de Medios de Comunicación's Net Debt?

The image below, which you can click on for greater detail, shows that Atresmedia Corporación de Medios de Comunicación had debt of €148.0m at the end of June 2025, a reduction from €177.9m over a year. However, it does have €223.0m in cash offsetting this, leading to net cash of €74.9m.

How Strong Is Atresmedia Corporación de Medios de Comunicación's Balance Sheet?

We can see from the most recent balance sheet that Atresmedia Corporación de Medios de Comunicación had liabilities of €558.7m falling due within a year, and liabilities of €87.5m due beyond that. On the other hand, it had cash of €223.0m and €331.1m worth of receivables due within a year. So it has liabilities totalling €92.1m more than its cash and near-term receivables, combined.

Given Atresmedia Corporación de Medios de Comunicación has a market capitalization of €1.22b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Atresmedia Corporación de Medios de Comunicación boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Atresmedia Corporación de Medios de Comunicación

But the bad news is that Atresmedia Corporación de Medios de Comunicación has seen its EBIT plunge 11% in the last twelve months. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Atresmedia Corporación de Medios de Comunicación's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Atresmedia Corporación de Medios de Comunicación has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Atresmedia Corporación de Medios de Comunicación recorded free cash flow worth a fulsome 83% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.

Summing Up

We could understand if investors are concerned about Atresmedia Corporación de Medios de Comunicación's liabilities, but we can be reassured by the fact it has has net cash of €74.9m. The cherry on top was that in converted 83% of that EBIT to free cash flow, bringing in €101m. So we don't have any problem with Atresmedia Corporación de Medios de Comunicación's use of debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 2 warning signs we've spotted with Atresmedia Corporación de Medios de Comunicación (including 1 which is potentially serious) .

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.