These 4 Measures Indicate That Advanced Nano Products (KOSDAQ:121600) Is Using Debt Extensively

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Advanced Nano Products Co., Ltd. (KOSDAQ:121600) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Advanced Nano Products's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Advanced Nano Products had ₩154.6b of debt, an increase on ₩144.6b, over one year. But it also has ₩241.2b in cash to offset that, meaning it has ₩86.6b net cash.

How Healthy Is Advanced Nano Products' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Advanced Nano Products had liabilities of ₩199.8b due within 12 months and liabilities of ₩1.96b due beyond that. Offsetting these obligations, it had cash of ₩241.2b as well as receivables valued at ₩15.8b due within 12 months. So it can boast ₩55.2b more liquid assets than total liabilities.

This short term liquidity is a sign that Advanced Nano Products could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Advanced Nano Products boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Advanced Nano Products

The modesty of its debt load may become crucial for Advanced Nano Products if management cannot prevent a repeat of the 87% cut to EBIT over the last year. When a company sees its earnings tank, it can sometimes find its relationships with its lenders turn sour. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Advanced Nano Products's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Advanced Nano Products 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. Over the last three years, Advanced Nano Products saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Advanced Nano Products has ₩86.6b in net cash and a decent-looking balance sheet. So although we see some areas for improvement, we're not too worried about Advanced Nano Products's balance sheet. While Advanced Nano Products didn't make a statutory profit in the last year, its positive EBIT suggests that profitability might not be far away. Click here to see if its earnings are heading in the right direction, over the medium term.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.