Kangwon Land (KRX:035250) Has A Rock Solid Balance Sheet

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Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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. As with many other companies Kangwon Land, Inc. (KRX:035250) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Kangwon Land Carry?

You can click the graphic below for the historical numbers, but it shows that Kangwon Land had ₩6.50b of debt in March 2025, down from ₩7.00b, one year before. But on the other hand it also has ₩1.05t in cash, leading to a ₩1.04t net cash position.

A Look At Kangwon Land's Liabilities

We can see from the most recent balance sheet that Kangwon Land had liabilities of ₩906.6b falling due within a year, and liabilities of ₩67.3b due beyond that. On the other hand, it had cash of ₩1.05t and ₩26.6b worth of receivables due within a year. So it actually has ₩100.5b more liquid assets than total liabilities.

This short term liquidity is a sign that Kangwon Land could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Kangwon Land boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Kangwon Land

While Kangwon Land doesn't seem to have gained much on the EBIT line, at least earnings remain stable for now. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Kangwon Land can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Kangwon Land has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Kangwon Land actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Kangwon Land has net cash of ₩1.04t, as well as more liquid assets than liabilities. The cherry on top was that in converted 119% of that EBIT to free cash flow, bringing in ₩305b. So is Kangwon Land's debt a risk? It doesn't seem so to us. 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. To that end, you should learn about the 3 warning signs we've spotted with Kangwon Land (including 1 which is potentially serious) .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.