Does Jin YoungLtd (KOSDAQ:285800) Have A Healthy Balance Sheet?

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 can see that Jin Young Co.,Ltd. (KOSDAQ:285800) 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?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Jin YoungLtd's Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 Jin YoungLtd had ₩15.3b of debt, an increase on ₩4.63b, over one year. On the flip side, it has ₩2.17b in cash leading to net debt of about ₩13.2b.

A Look At Jin YoungLtd's Liabilities

Zooming in on the latest balance sheet data, we can see that Jin YoungLtd had liabilities of ₩10.7b due within 12 months and liabilities of ₩15.8b due beyond that. Offsetting these obligations, it had cash of ₩2.17b as well as receivables valued at ₩6.51b due within 12 months. So its liabilities total ₩17.8b more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since Jin YoungLtd has a market capitalization of ₩40.9b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But it is Jin YoungLtd'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 .

Check out our latest analysis for Jin YoungLtd

In the last year Jin YoungLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 11%, to ₩34b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Jin YoungLtd produced an earnings before interest and tax (EBIT) loss. Indeed, it lost ₩2.9b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩8.3b in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. Be aware that Jin YoungLtd is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning...

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.