These 4 Measures Indicate That UbionLtd (KOSDAQ:084440) Is Using Debt Extensively

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. Importantly, Ubion Co.Ltd. (KOSDAQ:084440) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is UbionLtd's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 UbionLtd had debt of ₩4.42b, up from none in one year. However, it does have ₩8.52b in cash offsetting this, leading to net cash of ₩4.10b.

How Healthy Is UbionLtd's Balance Sheet?

We can see from the most recent balance sheet that UbionLtd had liabilities of ₩17.8b falling due within a year, and liabilities of ₩577.9m due beyond that. Offsetting this, it had ₩8.52b in cash and ₩2.71b in receivables that were due within 12 months. So its liabilities total ₩7.15b more than the combination of its cash and short-term receivables.

This deficit isn't so bad because UbionLtd is worth ₩20.9b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. Despite its noteworthy liabilities, UbionLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for UbionLtd

Although UbionLtd made a loss at the EBIT level, last year, it was also good to see that it generated ₩1.3b in EBIT over the last twelve months. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since UbionLtd 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. UbionLtd may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last year, UbionLtd burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While UbionLtd does have more liabilities than liquid assets, it also has net cash of ₩4.10b. So although we see some areas for improvement, we're not too worried about UbionLtd's balance sheet. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for UbionLtd (of which 1 is concerning!) you should know about.

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.