Kumyang Green Power (KOSDAQ:282720) Is Making Moderate Use Of Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Kumyang Green Power Co., Ltd. (KOSDAQ:282720) does have debt on its balance sheet. But is this debt a concern to shareholders?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, 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.

What Is Kumyang Green Power's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Kumyang Green Power had ₩31.8b of debt, an increase on ₩24.6b, over one year. On the flip side, it has ₩13.3b in cash leading to net debt of about ₩18.5b.

How Healthy Is Kumyang Green Power's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Kumyang Green Power had liabilities of ₩62.0b due within 12 months and liabilities of ₩5.91b due beyond that. Offsetting these obligations, it had cash of ₩13.3b as well as receivables valued at ₩26.8b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩27.9b.

While this might seem like a lot, it is not so bad since Kumyang Green Power has a market capitalization of ₩126.8b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Kumyang Green Power'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.

Check out our latest analysis for Kumyang Green Power

Over 12 months, Kumyang Green Power made a loss at the EBIT level, and saw its revenue drop to ₩205b, which is a fall of 24%. To be frank that doesn't bode well.

Caveat Emptor

While Kumyang Green Power's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost a very considerable ₩19b 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled ₩8.2b in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 2 warning signs we've spotted with Kumyang Green Power (including 1 which is a bit concerning) .

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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.