Yash Optics & Lens (NSE:YASHOPTICS) Seems To Use Debt Quite Sensibly

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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, Yash Optics & Lens Limited (NSE:YASHOPTICS) 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 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Yash Optics & Lens Carry?

As you can see below, Yash Optics & Lens had ₹146.0m of debt at March 2025, down from ₹252.6m a year prior. But it also has ₹316.7m in cash to offset that, meaning it has ₹170.7m net cash.

How Healthy Is Yash Optics & Lens' Balance Sheet?

The latest balance sheet data shows that Yash Optics & Lens had liabilities of ₹82.7m due within a year, and liabilities of ₹133.4m falling due after that. Offsetting these obligations, it had cash of ₹316.7m as well as receivables valued at ₹156.6m due within 12 months. So it can boast ₹257.3m more liquid assets than total liabilities.

This short term liquidity is a sign that Yash Optics & Lens could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Yash Optics & Lens boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Yash Optics & Lens

On the other hand, Yash Optics & Lens's EBIT dived 18%, over the last year. 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 you can't view debt in total isolation; since Yash Optics & Lens will need earnings to service that debt. 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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Yash Optics & Lens 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. During the last three years, Yash Optics & Lens burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Yash Optics & Lens has net cash of ₹170.7m, as well as more liquid assets than liabilities. So we are not troubled with Yash Optics & Lens's debt use. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Yash Optics & Lens is showing 3 warning signs in our investment analysis , you should know about...

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.