Health Check: How Prudently Does Genohco (KOSDAQ:361390) Use 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.' 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 note that Genohco., Inc. (KOSDAQ:361390) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Genohco's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Genohco had debt of ₩17.4b, up from ₩4.90b in one year. But on the other hand it also has ₩30.7b in cash, leading to a ₩13.3b net cash position.

How Strong Is Genohco's Balance Sheet?

We can see from the most recent balance sheet that Genohco had liabilities of ₩33.2b falling due within a year, and liabilities of ₩18.3b due beyond that. On the other hand, it had cash of ₩30.7b and ₩3.12b worth of receivables due within a year. So its liabilities total ₩17.7b more than the combination of its cash and short-term receivables.

Of course, Genohco has a market capitalization of ₩144.2b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Genohco also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Genohco's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for Genohco

In the last year Genohco had a loss before interest and tax, and actually shrunk its revenue by 2.2%, to ₩54b. That's not what we would hope to see.

So How Risky Is Genohco?

Although Genohco had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₩12b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Genohco's profit, revenue, and operating cashflow have changed over the last few years.

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.