Tsuburaya Fields Holdings (TSE:2767) Seems To Use Debt Rather Sparingly

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Tsuburaya Fields Holdings Inc. (TSE:2767) makes use of debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Tsuburaya Fields Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Tsuburaya Fields Holdings had JP¥10.0b of debt in September 2025, down from JP¥13.6b, one year before. However, its balance sheet shows it holds JP¥36.4b in cash, so it actually has JP¥26.4b net cash.

How Strong 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¥34.5b due within 12 months and liabilities of JP¥14.0b due beyond that. On the other hand, it had cash of JP¥36.4b and JP¥20.3b worth of receivables due within a year. So it actually has JP¥8.19b 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.

Check out our latest analysis for Tsuburaya Fields Holdings

Even more impressive was the fact that Tsuburaya Fields Holdings grew its EBIT by 136% over twelve months. That boost will make it even easier to pay down debt going forward. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Tsuburaya Fields Holdings's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Tsuburaya Fields Holdings 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. Over the most recent three years, Tsuburaya Fields Holdings recorded free cash flow worth 70% of its EBIT, which is around normal, given free cash flow excludes interest and tax. 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¥26.4b in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 136% over the last year. So we don't think Tsuburaya Fields Holdings'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. We've identified 2 warning signs with Tsuburaya Fields Holdings (at least 1 which is significant) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.