We Think Daebo MagneticLtd (KOSDAQ:290670) Has A Fair Chunk Of Debt

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 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. As with many other companies Daebo Magnetic Co.,Ltd. (KOSDAQ:290670) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Daebo MagneticLtd Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Daebo MagneticLtd had ₩6.49b of debt, an increase on ₩4.00b, over one year. However, it also had ₩6.00b in cash, and so its net debt is ₩494.2m.

A Look At Daebo MagneticLtd's Liabilities

Zooming in on the latest balance sheet data, we can see that Daebo MagneticLtd had liabilities of ₩26.6b due within 12 months and liabilities of ₩3.13b due beyond that. Offsetting this, it had ₩6.00b in cash and ₩960.6m in receivables that were due within 12 months. So its liabilities total ₩22.7b more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since Daebo MagneticLtd has a market capitalization of ₩111.0b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. Carrying virtually no net debt, Daebo MagneticLtd has a very light debt load indeed. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Daebo MagneticLtd will need earnings to service that debt. 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 Daebo MagneticLtd

Over 12 months, Daebo MagneticLtd made a loss at the EBIT level, and saw its revenue drop to ₩28b, which is a fall of 4.9%. That's not what we would hope to see.

Caveat Emptor

Importantly, Daebo MagneticLtd had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable ₩11b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩4.0b of cash over the last year. So suffice it to say we do consider the stock to be 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Daebo MagneticLtd (of which 2 don't sit too well with us!) you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.