Here's Why Yellow Balloon Tour (KOSDAQ:104620) Can Afford Some Debt

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.' 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. We can see that Yellow Balloon Tour Co., Ltd. (KOSDAQ:104620) does use debt in its business. But the more important question is: how much risk is that debt creating?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Yellow Balloon Tour's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Yellow Balloon Tour had ₩30.0b of debt, an increase on ₩20.6b, over one year. On the flip side, it has ₩29.1b in cash leading to net debt of about ₩975.6m.

How Strong Is Yellow Balloon Tour's Balance Sheet?

We can see from the most recent balance sheet that Yellow Balloon Tour had liabilities of ₩73.2b falling due within a year, and liabilities of ₩3.87b due beyond that. Offsetting these obligations, it had cash of ₩29.1b as well as receivables valued at ₩15.2b due within 12 months. So its liabilities total ₩32.9b more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Yellow Balloon Tour is worth ₩82.5b, 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. But either way, Yellow Balloon Tour has virtually no net debt, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is Yellow Balloon Tour's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Yellow Balloon Tour

In the last year Yellow Balloon Tour had a loss before interest and tax, and actually shrunk its revenue by 5.5%, to ₩119b. That's not what we would hope to see.

Caveat Emptor

Importantly, Yellow Balloon Tour had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩3.8b. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩7.1b of cash over the last year. So in short it's a really risky stock. 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. For example, we've discovered 1 warning sign for Yellow Balloon Tour that you should be aware of before investing here.

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.

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.