We Think Taihan Cable & Solution (KRX:001440) Can Stay On Top Of Its Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Taihan Cable & Solution Co., Ltd. (KRX:001440) makes use of debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is Taihan Cable & Solution's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Taihan Cable & Solution had debt of ₩563.0b, up from ₩441.0b in one year. However, it does have ₩702.9b in cash offsetting this, leading to net cash of ₩139.9b.

How Healthy Is Taihan Cable & Solution's Balance Sheet?

We can see from the most recent balance sheet that Taihan Cable & Solution had liabilities of ₩1.09t falling due within a year, and liabilities of ₩182.8b due beyond that. Offsetting this, it had ₩702.9b in cash and ₩473.1b in receivables that were due within 12 months. So it has liabilities totalling ₩94.3b more than its cash and near-term receivables, combined.

Of course, Taihan Cable & Solution has a market capitalization of ₩3.04t, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Taihan Cable & Solution also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Taihan Cable & Solution

Another good sign is that Taihan Cable & Solution has been able to increase its EBIT by 29% in twelve months, making it easier to pay down debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Taihan Cable & Solution can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Taihan Cable & Solution may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, Taihan Cable & Solution burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

We could understand if investors are concerned about Taihan Cable & Solution's liabilities, but we can be reassured by the fact it has has net cash of ₩139.9b. And it impressed us with its EBIT growth of 29% over the last year. So we are not troubled with Taihan Cable & Solution's debt use. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Be aware that Taihan Cable & Solution is showing 1 warning sign in our investment analysis , you should know about...

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.