Rami Levi Chain Stores Hashikma Marketing 2006 (TLV:RMLI) Has A Pretty 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.' 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. Importantly, Rami Levi Chain Stores Hashikma Marketing 2006 Ltd (TLV:RMLI) does carry debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Rami Levi Chain Stores Hashikma Marketing 2006 Carry?

The image below, which you can click on for greater detail, shows that at March 2025 Rami Levi Chain Stores Hashikma Marketing 2006 had debt of ₪12.8m, up from ₪10.1m in one year. But on the other hand it also has ₪1.05b in cash, leading to a ₪1.04b net cash position.

A Look At Rami Levi Chain Stores Hashikma Marketing 2006's Liabilities

The latest balance sheet data shows that Rami Levi Chain Stores Hashikma Marketing 2006 had liabilities of ₪2.09b due within a year, and liabilities of ₪1.86b falling due after that. Offsetting these obligations, it had cash of ₪1.05b as well as receivables valued at ₪441.5m due within 12 months. So it has liabilities totalling ₪2.45b more than its cash and near-term receivables, combined.

This deficit isn't so bad because Rami Levi Chain Stores Hashikma Marketing 2006 is worth ₪4.19b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. Despite its noteworthy liabilities, Rami Levi Chain Stores Hashikma Marketing 2006 boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Rami Levi Chain Stores Hashikma Marketing 2006

The good news is that Rami Levi Chain Stores Hashikma Marketing 2006 has increased its EBIT by 2.1% over twelve months, which should ease any concerns about debt repayment. There's no doubt that we learn most about debt from the balance sheet. But it is Rami Levi Chain Stores Hashikma Marketing 2006'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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Rami Levi Chain Stores Hashikma Marketing 2006 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. Happily for any shareholders, Rami Levi Chain Stores Hashikma Marketing 2006 actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

Although Rami Levi Chain Stores Hashikma Marketing 2006's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₪1.04b. And it impressed us with free cash flow of ₪503m, being 132% of its EBIT. So we are not troubled with Rami Levi Chain Stores Hashikma Marketing 2006's debt use. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Rami Levi Chain Stores Hashikma Marketing 2006 you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.