Is WON TECHLtd (KOSDAQ:336570) Using Too Much Debt?

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 WON TECH Co.,Ltd. (KOSDAQ:336570) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. 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. 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 WON TECHLtd Carry?

The image below, which you can click on for greater detail, shows that at March 2025 WON TECHLtd had debt of ₩19.6b, up from ₩17.3b in one year. But on the other hand it also has ₩101.4b in cash, leading to a ₩81.8b net cash position.

How Strong Is WON TECHLtd's Balance Sheet?

The latest balance sheet data shows that WON TECHLtd had liabilities of ₩55.2b due within a year, and liabilities of ₩924.1m falling due after that. Offsetting these obligations, it had cash of ₩101.4b as well as receivables valued at ₩21.3b due within 12 months. So it can boast ₩66.6b more liquid assets than total liabilities.

This surplus suggests that WON TECHLtd has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that WON TECHLtd has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for WON TECHLtd

Fortunately, WON TECHLtd grew its EBIT by 8.8% in the last year, making that debt load look even more manageable. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine WON TECHLtd's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. WON TECHLtd 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. During the last three years, WON TECHLtd produced sturdy free cash flow equating to 54% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that WON TECHLtd has net cash of ₩81.8b, as well as more liquid assets than liabilities. On top of that, it increased its EBIT by 8.8% in the last twelve months. So we don't think WON TECHLtd's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in WON TECHLtd, you may well want to click here to check an interactive graph of its earnings per share history.

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.