Is Artist Studio (KOSDAQ:200350) A Risky Investment?

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.' 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. We note that Artist Studio Inc. (KOSDAQ:200350) does have debt on its balance sheet. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Artist Studio's Debt?

The image below, which you can click on for greater detail, shows that Artist Studio had debt of ₩3.00b at the end of June 2025, a reduction from ₩4.00b over a year. But on the other hand it also has ₩40.5b in cash, leading to a ₩37.5b net cash position.

A Look At Artist Studio's Liabilities

According to the last reported balance sheet, Artist Studio had liabilities of ₩4.69b due within 12 months, and liabilities of ₩295.1m due beyond 12 months. Offsetting this, it had ₩40.5b in cash and ₩409.6m in receivables that were due within 12 months. So it actually has ₩35.9b more liquid assets than total liabilities.

This excess liquidity is a great indication that Artist Studio's balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Simply put, the fact that Artist Studio 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 Artist Studio'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.

View our latest analysis for Artist Studio

Over 12 months, Artist Studio made a loss at the EBIT level, and saw its revenue drop to ₩18b, which is a fall of 36%. To be frank that doesn't bode well.

So How Risky Is Artist Studio?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Artist Studio lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩1.4b and booked a ₩15b accounting loss. But the saving grace is the ₩37.5b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Artist Studio has 2 warning signs (and 1 which is potentially serious) we think you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.