Is Ck SolutionLtd (KRX:480370) Using Debt Sensibly?

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. Importantly, Ck Solution Co.,Ltd. (KRX:480370) does carry debt. But the real question is whether this debt is making the company risky.

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Ck SolutionLtd's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Ck SolutionLtd had debt of ₩28.5b, up from ₩24.5b in one year. However, its balance sheet shows it holds ₩29.3b in cash, so it actually has ₩817.7m net cash.

How Strong Is Ck SolutionLtd's Balance Sheet?

According to the last reported balance sheet, Ck SolutionLtd had liabilities of ₩97.4b due within 12 months, and liabilities of ₩3.47b due beyond 12 months. On the other hand, it had cash of ₩29.3b and ₩55.4b worth of receivables due within a year. So it has liabilities totalling ₩16.2b more than its cash and near-term receivables, combined.

Given Ck SolutionLtd has a market capitalization of ₩108.9b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Ck SolutionLtd boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is Ck SolutionLtd'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.

View our latest analysis for Ck SolutionLtd

In the last year Ck SolutionLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 18%, to ₩305b. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Ck SolutionLtd?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Ck SolutionLtd had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩9.9b of cash and made a loss of ₩15b. Given it only has net cash of ₩817.7m, the company may need to raise more capital if it doesn't reach break-even soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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. For example Ck SolutionLtd has 3 warning signs (and 1 which can't be ignored) we think 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.