Is adish (TSE:7093) Using Too Much Debt?

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. Importantly, adish Co., Ltd. (TSE:7093) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. 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 adish Carry?

You can click the graphic below for the historical numbers, but it shows that adish had JP¥280.0m of debt in September 2025, down from JP¥437.0m, one year before. But on the other hand it also has JP¥529.0m in cash, leading to a JP¥249.0m net cash position.

How Healthy Is adish's Balance Sheet?

We can see from the most recent balance sheet that adish had liabilities of JP¥641.0m falling due within a year, and liabilities of JP¥94.0m due beyond that. On the other hand, it had cash of JP¥529.0m and JP¥473.0m worth of receivables due within a year. So it actually has JP¥267.0m more liquid assets than total liabilities.

This excess liquidity suggests that adish is taking a careful approach to debt. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, adish boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is adish's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for adish

Over 12 months, adish saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

So How Risky Is adish?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that adish had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of JP¥144m and booked a JP¥39m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of JP¥249.0m. 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. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for adish you should know about.

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.