Would Raphas (KOSDAQ:214260) Be Better Off With Less Debt?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Raphas Co., Ltd. (KOSDAQ:214260) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Raphas's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Raphas had ₩38.5b of debt in June 2025, down from ₩40.7b, one year before. On the flip side, it has ₩29.5b in cash leading to net debt of about ₩9.06b.

How Strong Is Raphas' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Raphas had liabilities of ₩44.4b due within 12 months and liabilities of ₩4.31b due beyond that. Offsetting these obligations, it had cash of ₩29.5b as well as receivables valued at ₩5.41b due within 12 months. So its liabilities total ₩13.9b more than the combination of its cash and short-term receivables.

Given Raphas has a market capitalization of ₩129.1b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Raphas will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Raphas

In the last year Raphas wasn't profitable at an EBIT level, but managed to grow its revenue by 5.1%, to ₩29b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Raphas had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩3.4b. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of ₩7.8b into a profit. So to be blunt we do think it is risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 2 warning signs for Raphas you should be aware of, and 1 of them is a bit concerning.

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.