RemedLtd (KOSDAQ:302550) Seems To Use Debt Quite Sensibly

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Remed Co.,Ltd. (KOSDAQ:302550) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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.

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is RemedLtd's Net Debt?

The image below, which you can click on for greater detail, shows that RemedLtd had debt of ₩4.02b at the end of June 2025, a reduction from ₩16.2b over a year. But it also has ₩13.5b in cash to offset that, meaning it has ₩9.45b net cash.

How Strong Is RemedLtd's Balance Sheet?

According to the last reported balance sheet, RemedLtd had liabilities of ₩8.90b due within 12 months, and liabilities of ₩2.46b due beyond 12 months. On the other hand, it had cash of ₩13.5b and ₩5.59b worth of receivables due within a year. So it actually has ₩7.71b more liquid assets than total liabilities.

This surplus suggests that RemedLtd has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, RemedLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for RemedLtd

We also note that RemedLtd improved its EBIT from a last year's loss to a positive ₩276m. There's no doubt that we learn most about debt from the balance sheet. But it is RemedLtd'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. RemedLtd may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last year, RemedLtd recorded free cash flow worth a fulsome 98% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that RemedLtd has net cash of ₩9.45b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of ₩272m, being 98% of its EBIT. So is RemedLtd's debt a risk? It doesn't seem so to us. 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. For instance, we've identified 2 warning signs for RemedLtd that you should be aware of.

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.