Does Yujin Robot (KOSDAQ:056080) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. As with many other companies Yujin Robot Co., Ltd. (KOSDAQ:056080) makes use of debt. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own 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, 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. The first step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for Yujin Robot

What Is Yujin Robot's Net Debt?

As you can see below, Yujin Robot had ₩11.0b of debt at December 2020, down from ₩17.3b a year prior. However, it does have ₩28.0b in cash offsetting this, leading to net cash of ₩17.0b.

How Strong Is Yujin Robot's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Yujin Robot had liabilities of ₩25.0b due within 12 months and liabilities of ₩8.58b due beyond that. Offsetting these obligations, it had cash of ₩28.0b as well as receivables valued at ₩7.30b due within 12 months. So it can boast ₩1.69b more liquid assets than total liabilities.

This state of affairs indicates that Yujin Robot's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₩151.9b company is short on cash, but still worth keeping an eye on the balance sheet. Simply put, the fact that Yujin Robot has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Yujin Robot's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

In the last year Yujin Robot had a loss before interest and tax, and actually shrunk its revenue by 18%, to ₩58b. That's not what we would hope to see.

So How Risky Is Yujin Robot?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Yujin Robot had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of ₩3.1b and booked a ₩9.7b accounting loss. However, it has net cash of ₩17.0b, so it has a bit of time before it will need more capital. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Be aware that Yujin Robot is showing 2 warning signs in our investment analysis , and 1 of those is significant...

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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