Is I-Scream EduLtd (KOSDAQ:289010) Using Debt In A Risky Way?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 I-Scream Edu Co.,Ltd. (KOSDAQ:289010) does use debt in its business. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 I-Scream EduLtd Carry?

The image below, which you can click on for greater detail, shows that I-Scream EduLtd had debt of ₩4.47b at the end of June 2025, a reduction from ₩14.0b over a year. But on the other hand it also has ₩12.1b in cash, leading to a ₩7.66b net cash position.

A Look At I-Scream EduLtd's Liabilities

We can see from the most recent balance sheet that I-Scream EduLtd had liabilities of ₩21.8b falling due within a year, and liabilities of ₩3.27b due beyond that. Offsetting these obligations, it had cash of ₩12.1b as well as receivables valued at ₩11.3b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩1.55b.

Of course, I-Scream EduLtd has a market capitalization of ₩27.6b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, I-Scream EduLtd also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since I-Scream EduLtd 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 I-Scream EduLtd

In the last year I-Scream EduLtd had a loss before interest and tax, and actually shrunk its revenue by 6.9%, to ₩102b. That's not what we would hope to see.

So How Risky Is I-Scream EduLtd?

Although I-Scream EduLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₩3.2b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for I-Scream EduLtd (1 is a bit concerning) you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.