KONCAR - Elektroindustrija d.d (ZGSE:KOEI) Has A Rock Solid Balance Sheet

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.' 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. As with many other companies KONCAR - Elektroindustrija d.d. (ZGSE:KOEI) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is KONCAR - Elektroindustrija d.d's Net Debt?

As you can see below, at the end of September 2025, KONCAR - Elektroindustrija d.d had €67.1m of debt, up from €43.6m a year ago. Click the image for more detail. But on the other hand it also has €222.8m in cash, leading to a €155.7m net cash position.

How Healthy Is KONCAR - Elektroindustrija d.d's Balance Sheet?

The latest balance sheet data shows that KONCAR - Elektroindustrija d.d had liabilities of €605.2m due within a year, and liabilities of €65.1m falling due after that. Offsetting these obligations, it had cash of €222.8m as well as receivables valued at €511.8m due within 12 months. So it actually has €64.3m more liquid assets than total liabilities.

This surplus suggests that KONCAR - Elektroindustrija d.d has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, KONCAR - Elektroindustrija d.d boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for KONCAR - Elektroindustrija d.d

Another good sign is that KONCAR - Elektroindustrija d.d has been able to increase its EBIT by 26% in twelve months, making it easier to pay down debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if KONCAR - Elektroindustrija d.d 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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While KONCAR - Elektroindustrija d.d 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, KONCAR - Elektroindustrija d.d recorded free cash flow worth a fulsome 98% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that KONCAR - Elektroindustrija d.d has net cash of €155.7m, as well as more liquid assets than liabilities. The cherry on top was that in converted 98% of that EBIT to free cash flow, bringing in €160m. So we don't think KONCAR - Elektroindustrija d.d's use of debt is risky. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of KONCAR - Elektroindustrija d.d's earnings per share history for free.

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.