We Think Kaizen Platform (TSE:4170) Can Manage Its Debt With Ease

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 Kaizen Platform, Inc. (TSE:4170) makes use of debt. But is this debt a concern to shareholders?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

When Is Debt A Problem?

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. If things get really bad, the lenders can take control of the business. 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 examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Kaizen Platform Carry?

The image below, which you can click on for greater detail, shows that at June 2025 Kaizen Platform had debt of JP¥811.0m, up from JP¥559.0m in one year. However, it does have JP¥2.84b in cash offsetting this, leading to net cash of JP¥2.02b.

How Strong Is Kaizen Platform's Balance Sheet?

The latest balance sheet data shows that Kaizen Platform had liabilities of JP¥725.0m due within a year, and liabilities of JP¥613.0m falling due after that. Offsetting this, it had JP¥2.84b in cash and JP¥525.0m in receivables that were due within 12 months. So it actually has JP¥2.02b more liquid assets than total liabilities.

This luscious liquidity implies that Kaizen Platform's balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Kaizen Platform has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Kaizen Platform

Better yet, Kaizen Platform grew its EBIT by 121% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Kaizen Platform will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Kaizen Platform 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 last two years, Kaizen Platform actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Kaizen Platform has net cash of JP¥2.02b, as well as more liquid assets than liabilities. The cherry on top was that in converted 722% of that EBIT to free cash flow, bringing in JP¥124m. At the end of the day we're not concerned about Kaizen Platform's debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 3 warning signs for Kaizen Platform you should be aware of, and 1 of them is a bit concerning.

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.