Does Youngwire (KRX:012160) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Youngwire Co., Ltd. (KRX:012160) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Youngwire Carry?

The image below, which you can click on for greater detail, shows that Youngwire had debt of ₩145.2b at the end of June 2025, a reduction from ₩208.4b over a year. On the flip side, it has ₩14.4b in cash leading to net debt of about ₩130.8b.

A Look At Youngwire's Liabilities

The latest balance sheet data shows that Youngwire had liabilities of ₩218.5b due within a year, and liabilities of ₩39.4b falling due after that. On the other hand, it had cash of ₩14.4b and ₩95.3b worth of receivables due within a year. So it has liabilities totalling ₩148.3b more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the ₩41.2b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Youngwire would probably need a major re-capitalization if its creditors were to demand repayment. There's no doubt that we learn most about debt from the balance sheet. But it is Youngwire's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Youngwire

Over 12 months, Youngwire made a loss at the EBIT level, and saw its revenue drop to ₩464b, which is a fall of 4.5%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Youngwire produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping ₩7.2b. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. That said, it is possible that the company will turn its fortunes around. But we think that is unlikely since it is low on liquid assets, and made a loss of ₩34b in the last year. So we think this stock is quite risky. We'd prefer to pass. 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. For example, we've discovered 2 warning signs for Youngwire (1 is concerning!) that you should be aware of before investing here.

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.