YeaRimDang Publishing (KOSDAQ:036000) Has Debt But No Earnings; Should You Worry?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We note that YeaRimDang Publishing Co., Ltd. (KOSDAQ:036000) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for YeaRimDang Publishing

What Is YeaRimDang Publishing's Debt?

As you can see below, at the end of September 2024, YeaRimDang Publishing had ₩7.92b of debt, up from ₩3.52b a year ago. Click the image for more detail. But it also has ₩45.0b in cash to offset that, meaning it has ₩37.1b net cash.

A Look At YeaRimDang Publishing's Liabilities

The latest balance sheet data shows that YeaRimDang Publishing had liabilities of ₩15.2b due within a year, and liabilities of ₩5.62b falling due after that. Offsetting these obligations, it had cash of ₩45.0b as well as receivables valued at ₩4.64b due within 12 months. So it can boast ₩28.8b more liquid assets than total liabilities.

This excess liquidity is a great indication that YeaRimDang Publishing's balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that YeaRimDang Publishing has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is YeaRimDang Publishing'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.

Over 12 months, YeaRimDang Publishing made a loss at the EBIT level, and saw its revenue drop to ₩16b, which is a fall of 30%. To be frank that doesn't bode well.

So How Risky Is YeaRimDang Publishing?

While YeaRimDang Publishing lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of ₩1.1b. So taking that on face value, and considering the cash, we don't think its very risky in the near term. There's no doubt the next few years will be crucial to how the business matures. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for YeaRimDang Publishing (of which 1 is potentially serious!) you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.