Is Dexter StudiosLtd (KOSDAQ:206560) Weighed On By Its Debt Load?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. As with many other companies Dexter Studios Co.,Ltd. (KOSDAQ:206560) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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.

What Is Dexter StudiosLtd's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Dexter StudiosLtd had ₩23.9b of debt, an increase on ₩14.8b, over one year. But it also has ₩28.7b in cash to offset that, meaning it has ₩4.82b net cash.

A Look At Dexter StudiosLtd's Liabilities

According to the last reported balance sheet, Dexter StudiosLtd had liabilities of ₩28.0b due within 12 months, and liabilities of ₩18.9b due beyond 12 months. Offsetting these obligations, it had cash of ₩28.7b as well as receivables valued at ₩9.07b due within 12 months. So its liabilities total ₩9.06b more than the combination of its cash and short-term receivables.

Of course, Dexter StudiosLtd has a market capitalization of ₩170.6b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Dexter StudiosLtd boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Dexter StudiosLtd 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.

Check out our latest analysis for Dexter StudiosLtd

Over 12 months, Dexter StudiosLtd made a loss at the EBIT level, and saw its revenue drop to ₩58b, which is a fall of 8.6%. That's not what we would hope to see.

So How Risky Is Dexter StudiosLtd?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Dexter StudiosLtd had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩16b of cash and made a loss of ₩12b. But at least it has ₩4.82b on the balance sheet to spend on growth, near-term. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see 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. Case in point: We've spotted 1 warning sign for Dexter StudiosLtd 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.