We Think LEMON (KOSDAQ:294140) Has A Fair Chunk Of 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 LEMON Co., Ltd. (KOSDAQ:294140) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does LEMON Carry?

As you can see below, LEMON had ₩6.00b of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. On the flip side, it has ₩2.10b in cash leading to net debt of about ₩3.90b.

How Strong Is LEMON's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that LEMON had liabilities of ₩7.07b due within 12 months and no liabilities due beyond that. Offsetting these obligations, it had cash of ₩2.10b as well as receivables valued at ₩130.5m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩4.83b.

Since publicly traded LEMON shares are worth a total of ₩174.8b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is LEMON'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 LEMON

In the last year LEMON had a loss before interest and tax, and actually shrunk its revenue by 46%, to ₩4.7b. That makes us nervous, to say the least.

Caveat Emptor

Not only did LEMON's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost ₩5.8b 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. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩5.8b of cash over the last year. So suffice it to say we do consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Be aware that LEMON is showing 4 warning signs in our investment analysis , and 2 of those are significant...

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.