Is Cyfuse Biomedical K.K (TSE:4892) Weighed On By Its Debt Load?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Cyfuse Biomedical K.K. (TSE:4892) does use debt in its business. But is this debt a concern to shareholders?

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Cyfuse Biomedical K.K's Debt?

The image below, which you can click on for greater detail, shows that Cyfuse Biomedical K.K had debt of JP¥766.0m at the end of June 2025, a reduction from JP¥804.0m over a year. However, its balance sheet shows it holds JP¥2.70b in cash, so it actually has JP¥1.93b net cash.

A Look At Cyfuse Biomedical K.K's Liabilities

The latest balance sheet data shows that Cyfuse Biomedical K.K had liabilities of JP¥583.0m due within a year, and liabilities of JP¥320.0m falling due after that. On the other hand, it had cash of JP¥2.70b and JP¥32.0m worth of receivables due within a year. So it can boast JP¥1.83b more liquid assets than total liabilities.

This excess liquidity is a great indication that Cyfuse Biomedical K.K's balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Simply put, the fact that Cyfuse Biomedical K.K has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Cyfuse Biomedical K.K's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

See our latest analysis for Cyfuse Biomedical K.K

Over 12 months, Cyfuse Biomedical K.K reported revenue of JP¥65m, which is a gain of 6.6%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Cyfuse Biomedical K.K?

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 Cyfuse Biomedical K.K lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through JP¥718m of cash and made a loss of JP¥827m. While this does make the company a bit risky, it's important to remember it has net cash of JP¥1.93b. That means it could keep spending at its current rate for more than two years. 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. 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. For example Cyfuse Biomedical K.K has 3 warning signs (and 2 which are significant) we think you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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.