Does INCLUSIVE Holdings (TSE:7078) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies INCLUSIVE Holdings Inc. (TSE:7078) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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.

How Much Debt Does INCLUSIVE Holdings Carry?

You can click the graphic below for the historical numbers, but it shows that INCLUSIVE Holdings had JP¥646.0m of debt in September 2025, down from JP¥703.0m, one year before. However, it does have JP¥1.76b in cash offsetting this, leading to net cash of JP¥1.11b.

A Look At INCLUSIVE Holdings' Liabilities

Zooming in on the latest balance sheet data, we can see that INCLUSIVE Holdings had liabilities of JP¥862.0m due within 12 months and liabilities of JP¥682.0m due beyond that. Offsetting this, it had JP¥1.76b in cash and JP¥530.0m in receivables that were due within 12 months. So it actually has JP¥745.0m more liquid assets than total liabilities.

This surplus suggests that INCLUSIVE Holdings is using debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, INCLUSIVE Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since INCLUSIVE Holdings 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.

View our latest analysis for INCLUSIVE Holdings

Over 12 months, INCLUSIVE Holdings made a loss at the EBIT level, and saw its revenue drop to JP¥4.6b, which is a fall of 8.7%. We would much prefer see growth.

So How Risky Is INCLUSIVE Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year INCLUSIVE Holdings had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through JP¥352m of cash and made a loss of JP¥1.3b. While this does make the company a bit risky, it's important to remember it has net cash of JP¥1.11b. That kitty means the company can keep spending for growth for at least two years, at current rates. 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. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for INCLUSIVE Holdings (1 is concerning) you should be aware of.

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.