Shin Nippon Air Technologies (TSE:1952) Has A Rock Solid 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. As with many other companies Shin Nippon Air Technologies Co., Ltd. (TSE:1952) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Shin Nippon Air Technologies Carry?

As you can see below, at the end of September 2025, Shin Nippon Air Technologies had JP¥2.45b of debt, up from JP¥1.32b a year ago. Click the image for more detail. But it also has JP¥21.7b in cash to offset that, meaning it has JP¥19.2b net cash.

How Healthy Is Shin Nippon Air Technologies' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Shin Nippon Air Technologies had liabilities of JP¥30.3b due within 12 months and liabilities of JP¥4.26b due beyond that. On the other hand, it had cash of JP¥21.7b and JP¥48.6b worth of receivables due within a year. So it can boast JP¥35.8b more liquid assets than total liabilities.

It's good to see that Shin Nippon Air Technologies has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Shin Nippon Air Technologies boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Shin Nippon Air Technologies

In addition to that, we're happy to report that Shin Nippon Air Technologies has boosted its EBIT by 38%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Shin Nippon Air Technologies 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Shin Nippon Air Technologies may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Looking at the most recent three years, Shin Nippon Air Technologies recorded free cash flow of 42% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While it is always sensible to investigate a company's debt, in this case Shin Nippon Air Technologies has JP¥19.2b in net cash and a decent-looking balance sheet. And we liked the look of last year's 38% year-on-year EBIT growth. So we don't think Shin Nippon Air Technologies's use of debt is risky. 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 Shin Nippon Air Technologies is showing 1 warning sign in our investment analysis , 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.