These 4 Measures Indicate That Soulbrain (KOSDAQ:357780) Is Using Debt Reasonably Well

Warren Buffett famously said, '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 note that Soulbrain Co., Ltd. (KOSDAQ:357780) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Why Does Debt Bring Risk?

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. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is Soulbrain's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Soulbrain had debt of ₩75.9b, up from none in one year. But it also has ₩274.5b in cash to offset that, meaning it has ₩198.7b net cash.

How Healthy Is Soulbrain's Balance Sheet?

We can see from the most recent balance sheet that Soulbrain had liabilities of ₩122.9b falling due within a year, and liabilities of ₩152.6b due beyond that. Offsetting these obligations, it had cash of ₩274.5b as well as receivables valued at ₩78.7b due within 12 months. So it can boast ₩77.7b more liquid assets than total liabilities.

This surplus suggests that Soulbrain has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Soulbrain boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Soulbrain

On the other hand, Soulbrain saw its EBIT drop by 9.9% in the last twelve months. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Soulbrain'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Soulbrain 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 most recent three years, Soulbrain recorded free cash flow worth 69% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Soulbrain has ₩198.7b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₩56b, being 69% of its EBIT. So we are not troubled with Soulbrain's debt use. 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. Case in point: We've spotted 3 warning signs for Soulbrain you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.