Here's Why Edge FoundryLtd (KOSDAQ:105550) Can Afford Some Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Edge Foundry Co.,Ltd (KOSDAQ:105550) does carry debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Edge FoundryLtd's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Edge FoundryLtd had debt of ₩36.3b, up from ₩24.3b in one year. However, it also had ₩27.3b in cash, and so its net debt is ₩9.04b.

How Strong Is Edge FoundryLtd's Balance Sheet?

According to the last reported balance sheet, Edge FoundryLtd had liabilities of ₩56.5b due within 12 months, and liabilities of ₩7.39b due beyond 12 months. Offsetting these obligations, it had cash of ₩27.3b as well as receivables valued at ₩32.1b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩4.59b.

Having regard to Edge FoundryLtd's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₩289.3b company is struggling for cash, we still think it's worth monitoring its balance sheet. When analysing debt levels, the balance sheet is the obvious place to start. But it is Edge FoundryLtd's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Edge FoundryLtd

Over 12 months, Edge FoundryLtd saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.

Caveat Emptor

Importantly, Edge FoundryLtd had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩7.7b at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩7.0b of cash over the last year. So to be blunt we think it is risky. 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. For example Edge FoundryLtd has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.

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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.