Sammok S-FormLtd (KOSDAQ:018310) Has A Pretty Healthy Balance Sheet

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Sammok S-Form Co.,Ltd (KOSDAQ:018310) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

We've discovered 1 warning sign about Sammok S-FormLtd. View them for free.

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Sammok S-FormLtd Carry?

As you can see below, Sammok S-FormLtd had ₩12.8b of debt, at December 2024, which is about the same as the year before. You can click the chart for greater detail. However, it does have ₩248.8b in cash offsetting this, leading to net cash of ₩236.0b.

How Healthy Is Sammok S-FormLtd's Balance Sheet?

According to the last reported balance sheet, Sammok S-FormLtd had liabilities of ₩113.0b due within 12 months, and liabilities of ₩23.6b due beyond 12 months. Offsetting this, it had ₩248.8b in cash and ₩41.0b in receivables that were due within 12 months. So it can boast ₩153.1b more liquid assets than total liabilities.

This luscious liquidity implies that Sammok S-FormLtd's balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Sammok S-FormLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Sammok S-FormLtd

In fact Sammok S-FormLtd's saving grace is its low debt levels, because its EBIT has tanked 39% in the last twelve months. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. There's no doubt that we learn most about debt from the balance sheet. But it is Sammok S-FormLtd's earnings that will influence how the balance sheet holds up in the future. 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Sammok S-FormLtd 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 most recent three years, Sammok S-FormLtd recorded free cash flow worth 70% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Sammok S-FormLtd has ₩236.0b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₩76b, being 70% of its EBIT. So we don't think Sammok S-FormLtd's use of debt 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 - Sammok S-FormLtd has 1 warning sign we think you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.