Does SK IE Technology (KRX:361610) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 SK IE Technology Co., Ltd. (KRX:361610) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is SK IE Technology's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 SK IE Technology had debt of ₩1.75t, up from ₩1.45t in one year. However, it also had ₩280.0b in cash, and so its net debt is ₩1.47t.

How Healthy Is SK IE Technology's Balance Sheet?

The latest balance sheet data shows that SK IE Technology had liabilities of ₩1.02t due within a year, and liabilities of ₩835.7b falling due after that. On the other hand, it had cash of ₩280.0b and ₩75.0b worth of receivables due within a year. So its liabilities total ₩1.50t more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of ₩1.93t, so it does suggest shareholders should keep an eye on SK IE Technology's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine SK IE Technology'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.

Check out our latest analysis for SK IE Technology

Over 12 months, SK IE Technology made a loss at the EBIT level, and saw its revenue drop to ₩230b, which is a fall of 58%. That makes us nervous, to say the least.

Caveat Emptor

While SK IE Technology'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 ₩293b. 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. However, it doesn't help that it burned through ₩341b of cash over the last year. So in short it's a really risky stock. 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. Case in point: We've spotted 1 warning sign for SK IE Technology you should be aware of.

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.