Toyo Suisan Kaisha (TSE:2875) Has A Rock Solid 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.' 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 Toyo Suisan Kaisha, Ltd. (TSE:2875) makes use of debt. But should shareholders be worried about its use of debt?

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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. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Toyo Suisan Kaisha's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Toyo Suisan Kaisha had JP¥426.0m of debt in September 2025, down from JP¥463.0m, one year before. However, its balance sheet shows it holds JP¥244.2b in cash, so it actually has JP¥243.8b net cash.

How Healthy Is Toyo Suisan Kaisha's Balance Sheet?

We can see from the most recent balance sheet that Toyo Suisan Kaisha had liabilities of JP¥68.2b falling due within a year, and liabilities of JP¥30.7b due beyond that. Offsetting this, it had JP¥244.2b in cash and JP¥62.0b in receivables that were due within 12 months. So it actually has JP¥207.4b more liquid assets than total liabilities.

It's good to see that Toyo Suisan Kaisha has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, Toyo Suisan Kaisha boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Toyo Suisan Kaisha

The good news is that Toyo Suisan Kaisha has increased its EBIT by 2.8% over twelve months, which should ease any concerns about debt repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Toyo Suisan Kaisha 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Toyo Suisan Kaisha 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, Toyo Suisan Kaisha produced sturdy free cash flow equating to 64% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Toyo Suisan Kaisha has net cash of JP¥243.8b, as well as more liquid assets than liabilities. So we don't think Toyo Suisan Kaisha's use of debt is risky. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Toyo Suisan Kaisha's earnings per share history for free.

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.