Is Pearl Abyss (KOSDAQ:263750) Using Debt Sensibly?

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.' 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. As with many other companies Pearl Abyss Corp. (KOSDAQ:263750) makes use of debt. But should shareholders be worried about its use of debt?

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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. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Pearl Abyss Carry?

The image below, which you can click on for greater detail, shows that Pearl Abyss had debt of ₩81.2b at the end of June 2025, a reduction from ₩228.2b over a year. However, it does have ₩339.2b in cash offsetting this, leading to net cash of ₩258.0b.

How Healthy Is Pearl Abyss' Balance Sheet?

We can see from the most recent balance sheet that Pearl Abyss had liabilities of ₩196.3b falling due within a year, and liabilities of ₩119.4b due beyond that. Offsetting this, it had ₩339.2b in cash and ₩52.4b in receivables that were due within 12 months. So it can boast ₩75.9b more liquid assets than total liabilities.

This surplus suggests that Pearl Abyss has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Pearl Abyss 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 ultimately the future profitability of the business will decide if Pearl Abyss can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Pearl Abyss

Over 12 months, Pearl Abyss saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

So How Risky Is Pearl Abyss?

While Pearl Abyss lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of ₩16b. So taking that on face value, and considering the cash, we don't think its very risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. 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. Case in point: We've spotted 3 warning signs for Pearl Abyss you should be aware of.

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.