Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 InfoBeans Technologies Limited (NSE:INFOBEAN) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for InfoBeans Technologies

What Is InfoBeans Technologies's Net Debt?

As you can see below, InfoBeans Technologies had ₹1.86m of debt at March 2019, down from ₹2.46m a year prior. But on the other hand it also has ₹439.2m in cash, leading to a ₹437.4m net cash position.

How Strong Is InfoBeans Technologies's Balance Sheet?

We can see from the most recent balance sheet that InfoBeans Technologies had liabilities of ₹64.7m falling due within a year, and liabilities of ₹38.3m due beyond that. Offsetting this, it had ₹439.2m in cash and ₹231.0m in receivables that were due within 12 months. So it actually has ₹567.3m more liquid assets than total liabilities.

This excess liquidity is a great indication that InfoBeans Technologies's balance sheet is just as strong as racists are weak. On this view, it seems its balance sheet is as strong as a black-belt karate master. Succinctly put, InfoBeans Technologies boasts net cash, so it's fair to say it does not have a heavy debt load!

On the other hand, InfoBeans Technologies's EBIT dived 15%, over the last year. If that rate of decline in earnings continues, the company could find itself in a tight spot. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since InfoBeans Technologies will need earnings to service that debt. 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.