Tsuburaya Fields Holdings (TSE:2767) Could Easily Take On More Debt

Warren Buffett famously said, '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. We can see that Tsuburaya Fields Holdings Inc. (TSE:2767) does use debt in its business. But the real question is whether this debt is making the company risky.

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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. If things get really bad, the lenders can take control of the business. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Tsuburaya Fields Holdings Carry?

The image below, which you can click on for greater detail, shows that Tsuburaya Fields Holdings had debt of JP¥10.6b at the end of June 2025, a reduction from JP¥12.2b over a year. However, its balance sheet shows it holds JP¥31.6b in cash, so it actually has JP¥21.0b net cash.

How Healthy Is Tsuburaya Fields Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Tsuburaya Fields Holdings had liabilities of JP¥33.3b due within 12 months and liabilities of JP¥15.5b due beyond that. Offsetting this, it had JP¥31.6b in cash and JP¥22.9b in receivables that were due within 12 months. So it actually has JP¥5.76b more liquid assets than total liabilities.

This short term liquidity is a sign that Tsuburaya Fields Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Tsuburaya Fields Holdings has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Tsuburaya Fields Holdings

On top of that, Tsuburaya Fields Holdings grew its EBIT by 67% over the last twelve months, and that growth will make it easier to handle its debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Tsuburaya Fields Holdings can strengthen its balance sheet over time. 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 company can only pay off debt with cold hard cash, not accounting profits. While Tsuburaya Fields Holdings 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, Tsuburaya Fields Holdings produced sturdy free cash flow equating to 51% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to investigate a company's debt, in this case Tsuburaya Fields Holdings has JP¥21.0b in net cash and a decent-looking balance sheet. And we liked the look of last year's 67% year-on-year EBIT growth. So is Tsuburaya Fields Holdings's debt a risk? It doesn't seem so to us. 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 2 warning signs for Tsuburaya Fields Holdings 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.