Does Kikuchi Seisakusho (TSE:3444) Have A Healthy 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.' 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. We note that Kikuchi Seisakusho Co., Ltd. (TSE:3444) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Kikuchi Seisakusho's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Kikuchi Seisakusho had JP¥406.0m of debt in July 2025, down from JP¥1.60b, one year before. However, it does have JP¥1.88b in cash offsetting this, leading to net cash of JP¥1.47b.

How Strong Is Kikuchi Seisakusho's Balance Sheet?

According to the last reported balance sheet, Kikuchi Seisakusho had liabilities of JP¥1.06b due within 12 months, and liabilities of JP¥1.79b due beyond 12 months. Offsetting this, it had JP¥1.88b in cash and JP¥1.39b in receivables that were due within 12 months. So it actually has JP¥420.0m more liquid assets than total liabilities.

This surplus suggests that Kikuchi Seisakusho has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Kikuchi Seisakusho has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Kikuchi Seisakusho'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.

Check out our latest analysis for Kikuchi Seisakusho

Over 12 months, Kikuchi Seisakusho reported revenue of JP¥5.5b, which is a gain of 3.6%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Kikuchi Seisakusho?

While Kikuchi Seisakusho lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of JP¥180m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 4 warning signs for Kikuchi Seisakusho you should be aware of.

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.