Is Birdman (TSE:7063) Using Debt Sensibly?

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 Birdman Inc. (TSE:7063) does use debt in its business. 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 Birdman's Debt?

You can click the graphic below for the historical numbers, but it shows that Birdman had JP¥930.0m of debt in September 2025, down from JP¥1.52b, one year before. But it also has JP¥1.35b in cash to offset that, meaning it has JP¥415.0m net cash.

How Strong Is Birdman's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Birdman had liabilities of JP¥904.0m due within 12 months and liabilities of JP¥161.0m due beyond that. Offsetting these obligations, it had cash of JP¥1.35b as well as receivables valued at JP¥6.00m due within 12 months. So it can boast JP¥286.0m more liquid assets than total liabilities.

This surplus suggests that Birdman has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Birdman has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Birdman'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.

See our latest analysis for Birdman

In the last year Birdman had a loss before interest and tax, and actually shrunk its revenue by 83%, to JP¥262m. That makes us nervous, to say the least.

So How Risky Is Birdman?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Birdman lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of JP¥296m and booked a JP¥624m accounting loss. But the saving grace is the JP¥415.0m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example Birdman has 5 warning signs (and 3 which make us uncomfortable) we think you should know about.

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.