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.' 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. We note that Sinotruk Jinan Truck Co., Ltd. (SZSE:000951) does have debt on its balance sheet. But is this debt a concern to shareholders?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.
See our latest analysis for Sinotruk Jinan Truck
What Is Sinotruk Jinan Truck's Debt?
You can click the graphic below for the historical numbers, but it shows that Sinotruk Jinan Truck had CN¥1.00b of debt in March 2022, down from CN¥1.70b, one year before. However, its balance sheet shows it holds CN¥9.85b in cash, so it actually has CN¥8.85b net cash.
SZSE:000951 Debt to Equity History August 7th 2022
How Strong Is Sinotruk Jinan Truck's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Sinotruk Jinan Truck had liabilities of CN¥21.4b due within 12 months and liabilities of CN¥390.2m due beyond that. Offsetting these obligations, it had cash of CN¥9.85b as well as receivables valued at CN¥14.2b due within 12 months. So it can boast CN¥2.32b more liquid assets than total liabilities.
It's good to see that Sinotruk Jinan Truck 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, Sinotruk Jinan Truck boasts net cash, so it's fair to say it does not have a heavy debt load!
The modesty of its debt load may become crucial for Sinotruk Jinan Truck if management cannot prevent a repeat of the 72% cut to EBIT over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Sinotruk Jinan Truck can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Sinotruk Jinan Truck may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, Sinotruk Jinan Truck actually produced more free cash flow than EBIT over the last three 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 Sinotruk Jinan Truck has net cash of CN¥8.85b, as well as more liquid assets than liabilities. The cherry on top was that in converted 138% of that EBIT to free cash flow, bringing in CN¥4.3b. So is Sinotruk Jinan Truck's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 3 warning signs for Sinotruk Jinan Truck that you should be aware of before investing here.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
伯克希尔哈撒韦的外部基金经理理想汽车·卢直言不讳地说,最大的投资风险不是价格的波动,而是你是否会遭受永久性的资本损失。当你考察一家公司的风险有多大时,考虑它的资产负债表是很自然的,因为当一家企业倒闭时,债务往往会涉及到它。我们注意到中国重汽济南卡车有限公司(SZSE:000951)的资产负债表上确实有债务。但这笔债务对股东来说是一个担忧吗?
债务会带来什么风险?
债务是帮助企业发展的一种工具,但如果一家企业无法偿还贷款人的债务,那么它就只能听从贷款人的摆布。最终,如果公司不能履行其偿还债务的法定义务,股东可能会一无所有地离开。然而,更常见(但代价仍然高昂)的情况是,一家公司必须以极低的价格发行股票,永久性地稀释股东的股份,只是为了支撑其资产负债表。当然,债务的好处是,它往往代表着廉价资本,特别是当它用能够以高回报率进行再投资的能力取代公司的稀释时。在考虑一家公司的债务水平时,第一步是同时考虑其现金和债务。
查看我们对中国重汽济南卡车的最新分析
中国重汽济南卡车的债务是什么?
你可以点击下图查看历史数据,但它显示了中国重汽济南卡车在2022年3月的债务为人民币1.亿元,低于一年前的人民币17.亿元。然而,其资产负债表显示,它持有人民币98.5亿元现金,因此它实际上拥有人民币88.5亿元的净现金。
深交所:000951债转股历史2022年8月7日
中国重汽济南卡车的资产负债表有多强?
放大最新的资产负债表数据,我们可以看到,中国重汽济南卡车有214亿加元的负债在12个月内到期,还有3.902亿加元的负债在12个月内到期。作为对这些债务的抵销,该公司有98.5亿加元的现金以及价值142亿加元的应收账款在12个月内到期。因此,它可以吹嘘自己的流动资产比总计负债。
很高兴看到中国重汽济南卡车的资产负债表上有充足的流动性,这表明其对负债的管理是保守的。由于其强大的净资产状况,它不太可能面临与贷款人的问题。简而言之,中国重汽济南卡车拥有净现金,可以说它没有沉重的债务负担!
如果管理层不能防止去年息税前利润削减72%的情况重演,那么对中国重汽济南卡车来说,适度的债务负担可能变得至关重要。说到还债,收入下降并不比含糖汽水对你的健康有什么用处。当你分析债务时,资产负债表显然是你关注的领域。但最终,该业务未来的盈利能力将决定中国重汽济南卡车能否随着时间的推移加强其资产负债表。因此,如果你想看看专业人士的想法,你可能会发现这份关于分析师利润预测的免费报告很有趣。
最后,尽管税务人员可能喜欢会计利润,但贷款人只接受冷硬现金。中国重汽济南卡车的资产负债表上可能有净现金,但看看该业务将息税前利润(EBIT)转换为自由现金流的情况仍很有趣,因为这将影响其对债务的需求和管理债务的能力。令所有股东感到高兴的是,中国重汽济南卡车在过去三年里产生的自由现金流实际上超过了息税前利润。这种强大的摇钱树就像一只穿着大黄蜂西装的小狗一样温暖着我们的心。
总结
虽然我们同情投资者对债务的担忧,但您应该记住,中国重汽济南卡车的净现金为88.5亿元人民币,流动资产多于负债。上面的樱桃是IN将其中138%的EBIT转换为自由现金流,带来了43亿元人民币的收入。那么,中国重汽济南卡车的债务是否存在风险?但在我们看来并非如此。当你分析债务时,资产负债表显然是你关注的领域。然而,并非所有投资风险都存在于资产负债表中--远非如此。例如,我们发现中国重汽济南卡车的3个警告标志在这里投资之前你应该意识到这一点。
如果你有兴趣投资于可以在没有债务负担的情况下增长利润的企业,那么看看这个免费资产负债表上有净现金的成长型企业名单。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。