BASEInc (TSE:4477) Has A Rock Solid Balance Sheet

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.' 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. As with many other companies BASE,Inc. (TSE:4477) makes use of debt. But the real question is whether this debt is making the company risky.

We've discovered 2 warning signs about BASEInc. View them for free.

When Is Debt Dangerous?

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. 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. 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 step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does BASEInc Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 BASEInc had JP¥417.0m of debt, an increase on none, over one year. However, its balance sheet shows it holds JP¥23.4b in cash, so it actually has JP¥23.0b net cash.

How Strong Is BASEInc's Balance Sheet?

We can see from the most recent balance sheet that BASEInc had liabilities of JP¥29.5b falling due within a year, and liabilities of JP¥786.0m due beyond that. On the other hand, it had cash of JP¥23.4b and JP¥16.8b worth of receivables due within a year. So it actually has JP¥9.86b more liquid assets than total liabilities.

It's good to see that BASEInc has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, BASEInc boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for BASEInc

Even more impressive was the fact that BASEInc grew its EBIT by 1,706% over twelve months. 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 it is future earnings, more than anything, that will determine BASEInc's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While BASEInc 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, BASEInc actually produced more free cash flow than EBIT over the last two years. 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 BASEInc has net cash of JP¥23.0b, as well as more liquid assets than liabilities. The cherry on top was that in converted 351% of that EBIT to free cash flow, bringing in JP¥3.6b. The bottom line is that we do not find BASEInc's debt levels at all concerning. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example BASEInc has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.