Li Lu, the external fund manager endorsed by Charlie Munger of Berkshire Hathaway, candidly states, “The paramount investment risk lies not in price volatility but in the potential for a permanent capital loss.”
Evaluating a company’s risk often necessitates scrutiny of its debt usage, as excessive indebtedness can precipitate disaster. Canon Marketing Japan Inc. (TSE:8060), like many organizations, utilizes debt. However, does this debt signal an alarm for its shareholders?
When Does Debt Become Problematic?
Debt transitions from a manageable attribute to a liability when a business struggles to meet its financial commitments, either through available cash flow or the ability to secure capital on favorable terms. If a company fails to adhere to its debt repayment obligations, shareholders may find themselves with nothing.
A prevalent yet costly scenario involves a company diluting its shares at a diminished price solely to regain control over its debt. Conversely, the most common circumstance is when a company adeptly manages its debt in a manner advantageous to itself. The initial step in assessing debt levels involves analyzing both cash and liabilities together.
What Is the Debt Situation of Canon Marketing Japan?
Historical data indicate that Canon Marketing Japan reported JP¥2.90 billion in debt as of June 2025, a decrease from JP¥3.13 billion the year prior. Nevertheless, the company also boasts JP¥175.2 billion in cash, resulting in a net cash position of JP¥172.3 billion. TSE:8060 Debt to Equity History September 10th, 2025
Assessing Canon Marketing Japan’s Balance Sheet
The most recent balance sheet reveals Canon Marketing Japan carries liabilities of JP¥118.6 billion due within one year, alongside JP¥17.6 billion in long-term liabilities. However, with JP¥175.2 billion in cash and JP¥104.9 billion in receivables due within a year, the company enjoys a notable liquidity advantage, boasting JP¥143.8 billion in liquid assets over total liabilities.
This robust liquidity reflects prudent management of liabilities at Canon Marketing Japan, minimizing risks associated with creditors. With a net cash holding, it is reasonable to conclude that the company does not face a burdensome debt obligation.
Explore our latest analysis for Canon Marketing Japan.
Importantly, Canon Marketing Japan has achieved a 5.8% increase in EBIT over the past twelve months, alleviating concerns about its ability to manage debt repayment effectively. While the balance sheet provides critical insights into debt management, the company’s future profitability will ultimately determine its capacity to reinforce its balance sheet.
While Canon Marketing Japan maintains a favorable net cash position, evaluating its ability to convert earnings before interest and taxes (EBIT) into free cash flow is also crucial for understanding its cash trajectory. Over the past three years, the company’s free cash flow has equaled merely 45% of its EBIT, a lesser figure than anticipated. This subpar cash conversion could complicate debt management.
In Summary
Although concerns regarding debt are entirely valid, it is noteworthy that Canon Marketing Japan holds net cash of JP¥172.3 billion and possesses more liquid assets than its liabilities. Furthermore, its EBIT grew by 5.8% over the last year.
Thus, is the company’s debt truly a risk? It appears not. While the balance sheet is key in evaluating debt, one must remain attentive to risks that transcend it. For instance, we have identified one warning sign for Canon Marketing Japan that warrants consideration.
Ultimately, it may be prudent to focus on companies that do not require debt. Interested readers can access a list of growth stocks with zero net debt completely free at present.
Valuation is complex, but we aim to clarify it.
Determine whether Canon Marketing Japan is undervalued or overvalued through our comprehensive analysis, which includes fair value estimates, potential risks, dividends, insider trades, and financial health.
This article by RS Web Solutions and Simply Wall St is for informational purposes. We offer commentary based on historical data and analyst forecasts, employing an impartial methodology. Our articles should not be construed as financial advice. They do not constitute a recommendation to buy or sell any stock, nor do they account for your personal financial situation. We prioritize long-term focused analysis based on fundamental data. Note that our analysis may not account for the latest company announcements or qualitative material. RS Web Solutions and Simply Wall St hold no positions in any mentioned stocks.
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