Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk. 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 can see that Internationella Engelska Skolan i Sverige Holdings II AB (publ) (STO:ENG) does use debt in its business. But the real question is whether this debt is making the company risky.
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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
See our latest analysis for Internationella Engelska Skolan i Sverige Holdings II
What Is Internationella Engelska Skolan i Sverige Holdings II's Debt?
As you can see below, at the end of June 2019, Internationella Engelska Skolan i Sverige Holdings II had kr195.7m of debt, up from a year ago. Click the image for more detail. However, it does have kr245.0m in cash offsetting this, leading to net cash of kr49.3m.
A Look At Internationella Engelska Skolan i Sverige Holdings II's Liabilities
Zooming in on the latest balance sheet data, we can see that Internationella Engelska Skolan i Sverige Holdings II had liabilities of kr438.9m due within 12 months and liabilities of kr248.1m due beyond that. On the other hand, it had cash of kr245.0m and kr54.2m worth of receivables due within a year. So its liabilities total kr387.8m more than the combination of its cash and short-term receivables.
Of course, Internationella Engelska Skolan i Sverige Holdings II has a market capitalization of kr2.72b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Internationella Engelska Skolan i Sverige Holdings II boasts net cash, so it's fair to say it does not have a heavy debt load!