These 4 Measures Indicate That Asahi Concrete Works (TSE:5268) Is Using Debt Reasonably Well

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. Importantly, Asahi Concrete Works Co., Ltd. (TSE:5268) does carry debt. But should shareholders be worried about its use of debt?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Asahi Concrete Works Carry?

As you can see below, Asahi Concrete Works had JP¥670.0m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has JP¥5.33b in cash, leading to a JP¥4.66b net cash position.

A Look At Asahi Concrete Works' Liabilities

We can see from the most recent balance sheet that Asahi Concrete Works had liabilities of JP¥1.88b falling due within a year, and liabilities of JP¥2.36b due beyond that. On the other hand, it had cash of JP¥5.33b and JP¥1.75b worth of receivables due within a year. So it can boast JP¥2.85b more liquid assets than total liabilities.

This excess liquidity suggests that Asahi Concrete Works is taking a careful approach to debt. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, Asahi Concrete Works boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Asahi Concrete Works

It is just as well that Asahi Concrete Works's load is not too heavy, because its EBIT was down 47% over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. There's no doubt that we learn most about debt from the balance sheet. But it is Asahi Concrete Works's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Asahi Concrete Works 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, Asahi Concrete Works produced sturdy free cash flow equating to 62% 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 Asahi Concrete Works has JP¥4.66b in net cash and a decent-looking balance sheet. So we don't have any problem with Asahi Concrete Works's use of debt. 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. We've identified 3 warning signs with Asahi Concrete Works , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.