Foxconn Technology Co., Ltd. (TWSE:2354) is a company that uses debt in its business operations, but the key question is how much risk this debt is creating. The balance sheet shows that Foxconn had NT$9.54b in debt in September 2024, which was balanced out by NT$78.7b in cash, resulting in a net cash position of NT$69.2b. This excess liquidity suggests that the company’s balance sheet is strong.
Despite a 42% decrease in EBIT in the last year, Foxconn Technology’s low debt levels are its saving grace. The company has been able to convert 180% of its EBIT to free cash flow, which indicates strong cash generation. The analysis suggests that Foxconn Technology’s debt is not a significant risk, as it has a healthy balance sheet and strong cash flow.
While debt levels are important to consider, other factors also play a role in assessing a company’s risk. Foxconn Technology’s balance sheet indicates that the company is in a good position to handle adversity. However, potential investors should also be aware of the warning signs and risks associated with the company. Ultimately, the future profitability of Foxconn Technology will determine its ability to strengthen its balance sheet over time.
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