Does AMIYA (TSE:4258) Have A Healthy Balance Sheet?

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.' 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. Importantly, AMIYA Corporation (TSE:4258) does carry debt. But is this debt a concern to shareholders?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does AMIYA Carry?

You can click the graphic below for the historical numbers, but it shows that AMIYA had JP¥966.0m of debt in September 2025, down from JP¥1.10b, one year before. However, it does have JP¥3.97b in cash offsetting this, leading to net cash of JP¥3.01b.

A Look At AMIYA's Liabilities

Zooming in on the latest balance sheet data, we can see that AMIYA had liabilities of JP¥3.45b due within 12 months and liabilities of JP¥232.0m due beyond that. Offsetting these obligations, it had cash of JP¥3.97b as well as receivables valued at JP¥541.0m due within 12 months. So it can boast JP¥835.0m more liquid assets than total liabilities.

This short term liquidity is a sign that AMIYA could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, AMIYA boasts net cash, so it's fair to say it does not have a heavy debt load!

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Even more impressive was the fact that AMIYA grew its EBIT by 130% over twelve months. That boost will make it even easier to pay down debt going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is AMIYA'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 AMIYA 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. Happily for any shareholders, AMIYA actually produced more free cash flow than EBIT over the last two years. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While it is always sensible to investigate a company's debt, in this case AMIYA has JP¥3.01b in net cash and a decent-looking balance sheet. The cherry on top was that in converted 160% of that EBIT to free cash flow, bringing in JP¥1.3b. So is AMIYA's debt a risk? It doesn't seem so to us. 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. For example, we've discovered 2 warning signs for AMIYA (1 shouldn't be ignored!) that you should be aware of before investing here.

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.