Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 Pinduoduo Inc. (NASDAQ:PDD) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Pinduoduo

As you can see below, at the end of June 2022, Pinduoduo had CN¥14.9b of debt, up from CN¥11.3b a year ago. Click the image for more detail. But on the other hand it also has CN¥119.4b in cash, leading to a CN¥104.5b net cash position.

Zooming in on the latest balance sheet data, we can see that Pinduoduo had liabilities of CN¥85.7b due within 12 months and liabilities of CN¥15.4b due beyond that. Offsetting this, it had CN¥119.4b in cash and CN¥4.73b in receivables that were due within 12 months. So it actually has CN¥23.0b more liquid assets than total liabilities.

This short term liquidity is a sign that Pinduoduo could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Pinduoduo boasts net cash, so it's fair to say it does not have a heavy debt load!

It was also good to see that despite losing money on the EBIT line last year, Pinduoduo turned things around in the last 12 months, delivering and EBIT of CN¥20b. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Pinduoduo can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Pinduoduo may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last year, Pinduoduo actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

While it is always sensible to investigate a company's debt, in this case Pinduoduo has CN¥104.5b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of CN¥32b, being 162% of its EBIT. So is Pinduoduo's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 1 warning sign with Pinduoduo , and understanding them should be part of your investment process.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

传奇基金经理李露（Charlie Munger 支持他）曾经说过：“最大的投资风险不是价格的波动，而是你是否会遭受永久的资本损失。”在研究公司的资产负债表有多风险时，考虑公司的资产负债表是很自然的，因为企业倒闭时通常涉及债务。我们注意到 拼多多公司 纳斯达克股票代码：PDD）的资产负债表上确实有债务。但真正的问题是这笔债务是否使公司面临风险。

一般而言，只有当公司无法通过筹集资金或使用自己的现金流轻松还清债务时，债务才会成为真正的问题。归根结底，如果公司无法履行偿还债务的法律义务，股东可能会一无所有地离开。但是，更常见（但仍然昂贵）的情况是，公司为了控制债务，必须以低廉的股价稀释股东。当然，债务可以成为企业的重要工具，尤其是资本密集型企业。当我们考虑公司使用债务时，我们首先将现金和债务放在一起看。

查看我们对拼多多的最新分析

如下所示，截至2022年6月底，拼多多的债务为149亿元人民币，高于一年前的113亿元人民币。点击图片了解更多细节。但另一方面，它也有1194亿元人民币的现金，净现金状况达到1045亿元人民币。

放大最新的资产负债表数据，我们可以看到拼多多在12个月内到期的负债为857亿元人民币，在此之后的到期负债为154亿元人民币。抵消了这一点，它有1194亿元的现金和47.3亿元人民币的应收账款，这些应收账款将在12个月内到期。所以它实际上有23.0亿元人民币 更多 流动资产超过总负债。

这种短期流动性表明拼多多可能可以轻松还清债务，因为其资产负债表远未捉襟见肘。简而言之，拼多多拥有净现金，因此可以公平地说，它没有沉重的债务负担！

同样令人高兴的是，尽管去年在息税前利润线上亏损，但拼多多在过去12个月中扭转了局面，实现了200亿元人民币的息税前利润。在分析债务水平时，资产负债表是显而易见的起点。但归根结底，该业务未来的盈利能力将决定拼多多能否随着时间的推移加强其资产负债表。因此，如果你想看看专业人士的想法，你可能会发现这份关于分析师利润预测的免费报告很有趣。

最后，公司只能用冷硬现金偿还债务，不能用会计利润。拼多多的资产负债表上可能有净现金，但看看该企业如何将其利息和税前收益（EBIT）转换为自由现金流仍然很有趣，因为这将影响其对债务的需求和管理能力。去年，拼多多产生的自由现金流实际上超过了息税前利润。在保持贷款人的好感方面，没有什么比收到的现金更好的了。

虽然调查公司的债务总是明智之举，但在这种情况下，拼多多拥有1045亿元人民币的净现金和不错的资产负债表。它给我们留下了320亿元人民币的自由现金流，占其息税前利润的162％，给我们留下了深刻的印象。那么拼多多的债务有风险吗？在我们看来，情况并非如此。在分析债务水平时，资产负债表是显而易见的起点。但归根结底，每家公司都可能控制资产负债表之外存在的风险。 我们已经发现了 1 个警告标志 使用拼多多，了解它们应该是您投资过程的一部分。

当然，如果你是那种喜欢在没有债务负担的情况下购买股票的投资者，那么请立即查看我们的独家净现金增长股票清单。

对这篇文章有反馈吗？担心内容吗？ 取得联系 直接和我们在一起。 或者，给编辑团队 (at) simplywallst.com 发送电子邮件。Simply Wall St 的这篇文章本质上是笼统的。 我们仅使用公正的方法根据历史数据和分析师的预测提供评论，我们的文章无意作为财务建议。 它不构成买入或卖出任何股票的建议，也没有考虑您的目标或财务状况。我们的目标是为您提供由基本面数据驱动的长期重点分析。请注意，我们的分析可能不考虑最新的价格敏感公司公告或定性材料。简而言之，华尔街在上述任何股票中都没有头寸。