Would J Steel Company Holdings (KOSDAQ:023440) Be Better Off With Less 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.' 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 can see that J Steel Company Holdings Inc. (KOSDAQ:023440) does use debt in its business. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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.

What Is J Steel Company Holdings's Debt?

The image below, which you can click on for greater detail, shows that J Steel Company Holdings had debt of ₩41.9b at the end of June 2025, a reduction from ₩45.5b over a year. However, it does have ₩18.3b in cash offsetting this, leading to net debt of about ₩23.6b.

A Look At J Steel Company Holdings' Liabilities

The latest balance sheet data shows that J Steel Company Holdings had liabilities of ₩58.5b due within a year, and liabilities of ₩2.94b falling due after that. Offsetting this, it had ₩18.3b in cash and ₩8.16b in receivables that were due within 12 months. So its liabilities total ₩35.0b more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since J Steel Company Holdings has a market capitalization of ₩79.0b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But it is J Steel Company Holdings's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for J Steel Company Holdings

Over 12 months, J Steel Company Holdings made a loss at the EBIT level, and saw its revenue drop to ₩32b, which is a fall of 12%. That's not what we would hope to see.

Caveat Emptor

Not only did J Steel Company Holdings's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable ₩14b at the EBIT level. 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩11b of cash over the last year. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 4 warning signs for J Steel Company Holdings you should be aware of, and 2 of them shouldn't be ignored.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.