Does Dai Nippon Printing (TSE:7912) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. As with many other companies Dai Nippon Printing Co., Ltd. (TSE:7912) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Dai Nippon Printing's Debt?

The chart below, which you can click on for greater detail, shows that Dai Nippon Printing had JP¥162.0b in debt in March 2025; about the same as the year before. But on the other hand it also has JP¥255.0b in cash, leading to a JP¥93.0b net cash position.

A Look At Dai Nippon Printing's Liabilities

Zooming in on the latest balance sheet data, we can see that Dai Nippon Printing had liabilities of JP¥435.8b due within 12 months and liabilities of JP¥273.3b due beyond that. On the other hand, it had cash of JP¥255.0b and JP¥340.5b worth of receivables due within a year. So it has liabilities totalling JP¥113.6b more than its cash and near-term receivables, combined.

Given Dai Nippon Printing has a market capitalization of JP¥966.2b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Dai Nippon Printing also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for Dai Nippon Printing

Another good sign is that Dai Nippon Printing has been able to increase its EBIT by 24% in twelve months, making it easier to pay down debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Dai Nippon Printing's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Dai Nippon Printing 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. In the last three years, Dai Nippon Printing created free cash flow amounting to 15% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.

Summing Up

While Dai Nippon Printing does have more liabilities than liquid assets, it also has net cash of JP¥93.0b. And it impressed us with its EBIT growth of 24% over the last year. So we are not troubled with Dai Nippon Printing's debt use. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for Dai Nippon Printing (1 is potentially serious) you should be aware of.

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.