JLKInc (KOSDAQ:322510) Has Debt But No Earnings; Should You Worry?

Warren Buffett famously said, '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 JLK,Inc. (KOSDAQ:322510) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does JLKInc Carry?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 JLKInc had ₩22.0b of debt, an increase on ₩18.0b, over one year. But it also has ₩47.8b in cash to offset that, meaning it has ₩25.8b net cash.

How Healthy Is JLKInc's Balance Sheet?

We can see from the most recent balance sheet that JLKInc had liabilities of ₩8.82b falling due within a year, and liabilities of ₩16.5b due beyond that. Offsetting these obligations, it had cash of ₩47.8b as well as receivables valued at ₩606.4m due within 12 months. So it can boast ₩23.1b more liquid assets than total liabilities.

This short term liquidity is a sign that JLKInc could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, JLKInc boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is JLKInc'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.

View our latest analysis for JLKInc

In the last year JLKInc had a loss before interest and tax, and actually shrunk its revenue by 43%, to ₩1.4b. That makes us nervous, to say the least.

So How Risky Is JLKInc?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that JLKInc had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩11b and booked a ₩13b accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₩25.8b. That means it could keep spending at its current rate for more than two years. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for JLKInc you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.