Is TOP MATERIAL (KOSDAQ:360070) Using Too Much 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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that TOP MATERIAL Co., Ltd (KOSDAQ:360070) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is TOP MATERIAL's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 TOP MATERIAL had ₩57.4b of debt, an increase on ₩32.2b, over one year. However, it does have ₩24.2b in cash offsetting this, leading to net debt of about ₩33.2b.

How Strong Is TOP MATERIAL's Balance Sheet?

The latest balance sheet data shows that TOP MATERIAL had liabilities of ₩36.2b due within a year, and liabilities of ₩36.3b falling due after that. Offsetting this, it had ₩24.2b in cash and ₩66.8b in receivables that were due within 12 months. So it can boast ₩18.5b more liquid assets than total liabilities.

This short term liquidity is a sign that TOP MATERIAL could probably pay off its debt with ease, as its balance sheet is far from stretched. There's no doubt that we learn most about debt from the balance sheet. But it is TOP MATERIAL'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.

Check out our latest analysis for TOP MATERIAL

Over 12 months, TOP MATERIAL made a loss at the EBIT level, and saw its revenue drop to ₩40b, which is a fall of 64%. To be frank that doesn't bode well.

Caveat Emptor

While TOP MATERIAL's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping ₩22b. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. Still, we'd be more encouraged to study the business in depth if it already had some free cash flow. This one is a bit too risky for our liking. 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 - TOP MATERIAL has 1 warning sign we think you should be aware of.

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.

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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.