Does Maniker.Co.Ltd (KRX:027740) Have A Healthy Balance Sheet?

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. As with many other companies Maniker.Co.,Ltd (KRX:027740) makes use of debt. But should shareholders be worried about its use of debt?

Our free stock report includes 2 warning signs investors should be aware of before investing in Maniker.Co.Ltd. Read for free now.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Maniker.Co.Ltd Carry?

The chart below, which you can click on for greater detail, shows that Maniker.Co.Ltd had ₩52.3b in debt in December 2024; about the same as the year before. However, it does have ₩11.1b in cash offsetting this, leading to net debt of about ₩41.3b.

How Healthy Is Maniker.Co.Ltd's Balance Sheet?

The latest balance sheet data shows that Maniker.Co.Ltd had liabilities of ₩79.5b due within a year, and liabilities of ₩34.8b falling due after that. Offsetting these obligations, it had cash of ₩11.1b as well as receivables valued at ₩20.9b due within 12 months. So it has liabilities totalling ₩82.2b more than its cash and near-term receivables, combined.

When you consider that this deficiency exceeds the company's ₩70.5b market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Maniker.Co.Ltd will need earnings to service that debt. 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.

See our latest analysis for Maniker.Co.Ltd

In the last year Maniker.Co.Ltd had a loss before interest and tax, and actually shrunk its revenue by 2.0%, to ₩333b. That's not what we would hope to see.

Caveat Emptor

Importantly, Maniker.Co.Ltd had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable ₩9.1b at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through ₩3.2b in negative free cash flow over the last year. That means it's on the risky side of things. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example - Maniker.Co.Ltd has 2 warning signs we think you should be aware of.

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.