Is Csa Cosmic (KOSDAQ:083660) Using Too Much Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says '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. We can see that Csa Cosmic Co., Ltd. (KOSDAQ:083660) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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.

What Is Csa Cosmic's Debt?

As you can see below, Csa Cosmic had ₩8.49b of debt at March 2025, down from ₩9.23b a year prior. But on the other hand it also has ₩11.0b in cash, leading to a ₩2.54b net cash position.

A Look At Csa Cosmic's Liabilities

Zooming in on the latest balance sheet data, we can see that Csa Cosmic had liabilities of ₩14.8b due within 12 months and liabilities of ₩638.5m due beyond that. Offsetting these obligations, it had cash of ₩11.0b as well as receivables valued at ₩6.64b due within 12 months. So it can boast ₩2.28b more liquid assets than total liabilities.

This surplus suggests that Csa Cosmic has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Csa Cosmic has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Csa Cosmic'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.

See our latest analysis for Csa Cosmic

Over 12 months, Csa Cosmic made a loss at the EBIT level, and saw its revenue drop to ₩36b, which is a fall of 11%. We would much prefer see growth.

So How Risky Is Csa Cosmic?

While Csa Cosmic lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow ₩1.6b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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. To that end, you should be aware of the 2 warning signs we've spotted with Csa Cosmic .

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.