When is religion a problem?
In general, debt becomes a real problem only when the company cannot pay it off easily, either by raising capital or through its cash flow. An integral part of capitalism is the process of "creative destruction" where failed companies are mercilessly liquidated by bankers. However, the most common (but still very expensive) situation is where the company has to dilute shareholders at a cheap share price just to control the debt. Having said that, the most common situation is when a company manages its debt reasonably well - and for its own benefit. When we consider using a debt company, we first look at cash and debt together.
Watch our latest analyzes of Wise Talent IT
What is the wise religion of talent IT?
You can click on the chart below to get historical figures, but it shows that as of December 2019, Wise Talent Information Technology had debts worth 59.0 million CN, in excess of none, over the course of one year. But on the other hand, it also contains 2.59 billion yen in cash, resulting in a net cash position of 2.53 billion yen.
SEHK: 6,100 historic debt March 31, 2020
How strong is the talent IT balance sheet?
According to the most recently reported balance sheet, Wise Talent Information Technology had discounts of 1.02 billion CN due within 12 months, and 7.7 CN discounts 88.7 million due after 12 months. To offset these liabilities, she had a cash value of CNY 2.59 billion plus a debit of CNY 79.2 million due within 12 months. So it already has liquidity assets of ¥ 1.56b more than total liabilities.
This surplus indicates that Wise Talent Information Technology is using debt in a manner that appears safe and conservative. Because it contains a lot of assets, you are not likely to encounter problems with lenders. Simply put, the fact that Wise Talent Information Technology has more money than debt is arguably a good indication that it can safely manage its debt.
Although Wise Talent Information Technology incurred a loss at the EBIT level, last year, it was also nice to see that it generated CN m 39m on EBIT during the past twelve months. It is clear that the balance sheet is the area to focus on when you are analyzing debt. But ultimately, future business profitability will determine whether Wise Talent Information Technology is able to boost its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst earnings forecast interesting.
Finally, a business needs free cash flow to repay debts; accounting profits do not interrupt it. Wise Talent Information Technology may have net cash on the balance sheet, but it is still interesting to consider how the business converts its EBIT earnings to free cash flow, as this will affect their need for debt management capacity. Over the past year, Wise Talent Information Technology has already produced more free cash flow than EBIT. This kind of strong cash transfer makes us as excited as fans when the strikes go down at the Daft Punk party.
The story continues
Summarize the above
While it always makes sense to check the company's debt, Wise Talent Information Technology in this case has 2.53 billion yen in net cash. The cherry at the top was that it converted 602% of this profit before interest and taxes into free cash flow, to reach مليون 233 million. So we don't think Wise Talent Information Technology's use of debt is risky. It is clear that the balance sheet is the area to focus on when you are analyzing debt. But in the end, every company can have extrabudgetary risks. To this end, you should be aware of the warning signs that we have detected with Wise Talent Information Technology.
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