Health Check: How Prudently Does FNC ENTERTAINMENT (KOSDAQ:173940) Use Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, FNC ENTERTAINMENT Co., Ltd. (KOSDAQ:173940) does carry debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does FNC ENTERTAINMENT Carry?

As you can see below, at the end of June 2025, FNC ENTERTAINMENT had ₩19.9b of debt, up from ₩3.59b a year ago. Click the image for more detail. However, its balance sheet shows it holds ₩29.4b in cash, so it actually has ₩9.58b net cash.

How Healthy Is FNC ENTERTAINMENT's Balance Sheet?

The latest balance sheet data shows that FNC ENTERTAINMENT had liabilities of ₩72.3b due within a year, and liabilities of ₩16.4b falling due after that. Offsetting this, it had ₩29.4b in cash and ₩7.39b in receivables that were due within 12 months. So its liabilities total ₩51.9b more than the combination of its cash and short-term receivables.

When you consider that this deficiency exceeds the company's ₩47.4b market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. FNC ENTERTAINMENT boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since FNC ENTERTAINMENT 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.

View our latest analysis for FNC ENTERTAINMENT

Over 12 months, FNC ENTERTAINMENT saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.

So How Risky Is FNC ENTERTAINMENT?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months FNC ENTERTAINMENT lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩18b and booked a ₩9.3b accounting loss. But at least it has ₩9.58b on the balance sheet to spend on growth, near-term. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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. We've identified 1 warning sign with FNC ENTERTAINMENT , and understanding them should be part of your investment process.

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.