eSang NetworksLtd (KOSDAQ:080010) Seems To Use Debt Rather Sparingly

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that eSang Networks Co.,Ltd (KOSDAQ:080010) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does eSang NetworksLtd Carry?

You can click the graphic below for the historical numbers, but it shows that eSang NetworksLtd had ₩7.17b of debt in June 2025, down from ₩9.30b, one year before. However, it does have ₩67.3b in cash offsetting this, leading to net cash of ₩60.2b.

How Healthy Is eSang NetworksLtd's Balance Sheet?

We can see from the most recent balance sheet that eSang NetworksLtd had liabilities of ₩24.5b falling due within a year, and liabilities of ₩12.5b due beyond that. On the other hand, it had cash of ₩67.3b and ₩7.01b worth of receivables due within a year. So it actually has ₩37.4b more liquid assets than total liabilities.

This surplus liquidity suggests that eSang NetworksLtd's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, eSang NetworksLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for eSang NetworksLtd

On top of that, eSang NetworksLtd grew its EBIT by 57% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since eSang NetworksLtd will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While eSang NetworksLtd 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. During the last three years, eSang NetworksLtd produced sturdy free cash flow equating to 71% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that eSang NetworksLtd has net cash of ₩60.2b, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 57% over the last year. At the end of the day we're not concerned about eSang NetworksLtd's debt. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Be aware that eSang NetworksLtd is showing 1 warning sign in our investment analysis , you should know about...

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.