Does Ilshin Spinning (KRX:003200) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 Ilshin Spinning Co., Ltd (KRX:003200) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 Ilshin Spinning's Net Debt?

As you can see below, Ilshin Spinning had ₩101.4b of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have ₩183.3b in cash offsetting this, leading to net cash of ₩81.9b.

How Strong Is Ilshin Spinning's Balance Sheet?

According to the last reported balance sheet, Ilshin Spinning had liabilities of ₩148.5b due within 12 months, and liabilities of ₩62.2b due beyond 12 months. Offsetting this, it had ₩183.3b in cash and ₩153.0b in receivables that were due within 12 months. So it can boast ₩125.5b more liquid assets than total liabilities.

This excess liquidity is a great indication that Ilshin Spinning's balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Ilshin Spinning has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Ilshin Spinning

Better yet, Ilshin Spinning grew its EBIT by 10,674% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Ilshin Spinning'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Ilshin Spinning has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. In the last two years, Ilshin Spinning's free cash flow amounted to 20% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to investigate a company's debt, in this case Ilshin Spinning has ₩81.9b in net cash and a decent-looking balance sheet. And we liked the look of last year's 10,674% year-on-year EBIT growth. So is Ilshin Spinning's debt a risk? It doesn't seem so to us. 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 instance, we've identified 1 warning sign for Ilshin Spinning that you should be aware of.

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.