Fujitsu (TSE:6702) Seems To Use Debt Rather Sparingly

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. As with many other companies Fujitsu Limited (TSE:6702) makes use of debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Fujitsu Carry?

The image below, which you can click on for greater detail, shows that Fujitsu had debt of JP¥196.3b at the end of June 2025, a reduction from JP¥283.4b over a year. But on the other hand it also has JP¥641.4b in cash, leading to a JP¥445.1b net cash position.

How Strong Is Fujitsu's Balance Sheet?

We can see from the most recent balance sheet that Fujitsu had liabilities of JP¥1.03t falling due within a year, and liabilities of JP¥243.3b due beyond that. Offsetting these obligations, it had cash of JP¥641.4b as well as receivables valued at JP¥768.5b due within 12 months. So it actually has JP¥135.3b more liquid assets than total liabilities.

This short term liquidity is a sign that Fujitsu could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Fujitsu has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Fujitsu

In addition to that, we're happy to report that Fujitsu has boosted its EBIT by 55%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Fujitsu's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Fujitsu 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. During the last three years, Fujitsu produced sturdy free cash flow equating to 59% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Fujitsu has net cash of JP¥445.1b, as well as more liquid assets than liabilities. And we liked the look of last year's 55% year-on-year EBIT growth. So we don't think Fujitsu's use of debt is risky. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Fujitsu's earnings per share history for free.

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.

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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.