Here's Why K-Auction.Co.Ltd (KOSDAQ:102370) Can Afford Some Debt

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. We can see that K-Auction.Co.Ltd. (KOSDAQ:102370) does use debt in its business. But the real question is whether this debt is making the company risky.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does K-Auction.Co.Ltd Carry?

As you can see below, K-Auction.Co.Ltd had ₩77.2b 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 ₩15.0b in cash offsetting this, leading to net debt of about ₩62.2b.

How Healthy Is K-Auction.Co.Ltd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that K-Auction.Co.Ltd had liabilities of ₩32.1b due within 12 months and liabilities of ₩57.6b due beyond that. Offsetting this, it had ₩15.0b in cash and ₩2.42b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩72.2b.

This deficit isn't so bad because K-Auction.Co.Ltd is worth ₩139.3b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But it is K-Auction.Co.Ltd'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.

Check out our latest analysis for K-Auction.Co.Ltd

In the last year K-Auction.Co.Ltd wasn't profitable at an EBIT level, but managed to grow its revenue by 49%, to ₩20b. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

While we can certainly appreciate K-Auction.Co.Ltd's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. Indeed, it lost ₩4.1b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩2.9b of cash over the last year. So suffice it to say we do consider the stock to be risky. 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. To that end, you should learn about the 3 warning signs we've spotted with K-Auction.Co.Ltd (including 2 which shouldn't be ignored) .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.