LONGi Green Energy Technology Co., Ltd. (SHSE:601012) is a company that utilizes debt like many others in the market. However, the key question is whether this debt poses a risk to the company. Debt becomes a problem when a company cannot easily pay it off, potentially leading to bankruptcy or dilution of shareholders.
As of September 2024, LONGi Green Energy Technology had CN¥21.4b of debt, but also held CN¥51.1b in cash, resulting in a net cash position of CN¥29.8b. The company had CN¥63.0b in liabilities due within 12 months and CN¥28.9b due beyond 12 months, with cash and receivables totaling CN¥26.3b more than its liabilities.
Despite its significant liabilities, LONGi Green Energy Technology has a strong net cash position, indicating that it does not carry a heavy debt load. However, the company experienced a loss in EBIT and a decline in revenue over the past year, potentially signaling risk.
It’s important to consider a company’s balance sheet strength and future earnings potential when evaluating its risk level. While debt levels provide important insights, other factors such as profitability and cash flow also play a crucial role in assessing risk. Investors may want to keep a close eye on LONGi Green Energy Technology’s performance to ensure the company remains financially stable in the future.
Overall, understanding a company’s debt levels and financial health is essential for making informed investment decisions. While debt can be a useful tool for growth, excessive debt can pose significant risks to a company’s stability and shareholder value.
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