Is Willbes (KRX:008600) 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies The Willbes & CO., Ltd. (KRX:008600) makes use of debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. 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 Willbes's Net Debt?

The chart below, which you can click on for greater detail, shows that Willbes had ₩142.5b in debt in September 2025; about the same as the year before. However, because it has a cash reserve of ₩18.4b, its net debt is less, at about ₩124.1b.

A Look At Willbes' Liabilities

According to the last reported balance sheet, Willbes had liabilities of ₩167.0b due within 12 months, and liabilities of ₩32.4b due beyond 12 months. On the other hand, it had cash of ₩18.4b and ₩54.0b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩127.1b.

This deficit casts a shadow over the ₩22.6b company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Willbes would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Willbes will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Willbes

In the last year Willbes had a loss before interest and tax, and actually shrunk its revenue by 9.6%, to ₩198b. That's not what we would hope to see.

Caveat Emptor

Importantly, Willbes had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₩13b. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it lost ₩27b in just last twelve months, and it doesn't have much by way of liquid assets. So while it's not wise to assume the company will fail, we do think it's risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for Willbes (1 is a bit concerning) you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.