Is Chorokbaem Media (KOSDAQ:047820) Weighed On By Its Debt Load?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 note that Chorokbaem Media Co., Ltd. (KOSDAQ:047820) does have debt on its balance sheet. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Chorokbaem Media's Net Debt?

As you can see below, at the end of March 2025, Chorokbaem Media had ₩74.4b of debt, up from ₩29.5b a year ago. Click the image for more detail. However, its balance sheet shows it holds ₩180.1b in cash, so it actually has ₩105.7b net cash.

A Look At Chorokbaem Media's Liabilities

We can see from the most recent balance sheet that Chorokbaem Media had liabilities of ₩125.0b falling due within a year, and liabilities of ₩11.2b due beyond that. Offsetting this, it had ₩180.1b in cash and ₩11.7b in receivables that were due within 12 months. So it actually has ₩55.6b more liquid assets than total liabilities.

This surplus strongly suggests that Chorokbaem Media has a rock-solid balance sheet (and the debt is of no concern whatsoever). On this view, lenders should feel as safe as the beloved of a black-belt karate master. Simply put, the fact that Chorokbaem Media has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Chorokbaem Media will need earnings to service that debt. 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.

See our latest analysis for Chorokbaem Media

Over 12 months, Chorokbaem Media made a loss at the EBIT level, and saw its revenue drop to ₩215b, which is a fall of 5.8%. We would much prefer see growth.

So How Risky Is Chorokbaem Media?

While Chorokbaem Media lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow ₩23b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Chorokbaem Media you should be aware of.

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.