Is Kencoa Aerospace (KOSDAQ:274090) Weighed On By Its Debt Load?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Kencoa Aerospace Corporation (KOSDAQ:274090) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Kencoa Aerospace Carry?

The image below, which you can click on for greater detail, shows that Kencoa Aerospace had debt of ₩39.7b at the end of June 2025, a reduction from ₩43.8b over a year. However, it does have ₩43.5b in cash offsetting this, leading to net cash of ₩3.79b.

A Look At Kencoa Aerospace's Liabilities

The latest balance sheet data shows that Kencoa Aerospace had liabilities of ₩47.2b due within a year, and liabilities of ₩21.7b falling due after that. On the other hand, it had cash of ₩43.5b and ₩18.6b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩6.80b.

Of course, Kencoa Aerospace has a market capitalization of ₩157.4b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Kencoa Aerospace also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Kencoa Aerospace'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.

See our latest analysis for Kencoa Aerospace

Over 12 months, Kencoa Aerospace made a loss at the EBIT level, and saw its revenue drop to ₩81b, which is a fall of 11%. We would much prefer see growth.

So How Risky Is Kencoa Aerospace?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Kencoa Aerospace had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩50b and booked a ₩9.1b accounting loss. With only ₩3.79b on the balance sheet, it would appear that its going to need to raise capital again soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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, we've discovered 1 warning sign for Kencoa Aerospace that you should be aware of before investing here.

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.