M.Yochananof and Sons (1988) (TLV:YHNF) Has A Somewhat Strained Balance Sheet

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, M.Yochananof and Sons (1988) Ltd (TLV:YHNF) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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.

How Much Debt Does M.Yochananof and Sons (1988) Carry?

The image below, which you can click on for greater detail, shows that M.Yochananof and Sons (1988) had debt of ₪297.8m at the end of June 2025, a reduction from ₪331.5m over a year. But it also has ₪310.5m in cash to offset that, meaning it has ₪12.6m net cash.

How Strong Is M.Yochananof and Sons (1988)'s Balance Sheet?

We can see from the most recent balance sheet that M.Yochananof and Sons (1988) had liabilities of ₪989.0m falling due within a year, and liabilities of ₪1.87b due beyond that. On the other hand, it had cash of ₪310.5m and ₪492.4m worth of receivables due within a year. So it has liabilities totalling ₪2.05b more than its cash and near-term receivables, combined.

M.Yochananof and Sons (1988) has a market capitalization of ₪3.99b, 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, M.Yochananof and Sons (1988) also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for M.Yochananof and Sons (1988)

We saw M.Yochananof and Sons (1988) grow its EBIT by 2.5% in the last twelve months. That's far from incredible but it is a good thing, when it comes to paying off debt. 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 M.Yochananof and Sons (1988) will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While M.Yochananof and Sons (1988) 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. In the last three years, M.Yochananof and Sons (1988)'s free cash flow amounted to 21% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

Although M.Yochananof and Sons (1988)'s balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₪12.6m. And it also grew its EBIT by 2.5% over the last year. So while M.Yochananof and Sons (1988) does not have a great balance sheet, it's certainly not too bad. Over time, share prices tend to follow earnings per share, so if you're interested in M.Yochananof and Sons (1988), you may well want to click here to check an interactive graph of its earnings per share history.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.