Dongsung FineTec (KOSDAQ:033500) Has A Rock Solid Balance Sheet

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Dongsung FineTec Co., Ltd. (KOSDAQ:033500) does use debt in its business. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. 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 Dongsung FineTec Carry?

You can click the graphic below for the historical numbers, but it shows that Dongsung FineTec had ₩17.3b of debt in March 2025, down from ₩35.5b, one year before. However, it does have ₩96.3b in cash offsetting this, leading to net cash of ₩79.0b.

How Healthy Is Dongsung FineTec's Balance Sheet?

We can see from the most recent balance sheet that Dongsung FineTec had liabilities of ₩254.6b falling due within a year, and liabilities of ₩9.04b due beyond that. Offsetting these obligations, it had cash of ₩96.3b as well as receivables valued at ₩58.3b due within 12 months. So its liabilities total ₩109.0b more than the combination of its cash and short-term receivables.

Since publicly traded Dongsung FineTec shares are worth a total of ₩908.7b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Dongsung FineTec boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Dongsung FineTec

Another good sign is that Dongsung FineTec has been able to increase its EBIT by 21% in twelve months, making it easier to pay down debt. 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 Dongsung FineTec'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. While Dongsung FineTec has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Dongsung FineTec actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

Although Dongsung FineTec's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₩79.0b. The cherry on top was that in converted 120% of that EBIT to free cash flow, bringing in ₩79b. So is Dongsung FineTec's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Dongsung FineTec, you may well want to click here to check an interactive graph of its earnings per share history.

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.