Here's Why Aniplus (KOSDAQ:310200) Can Manage Its Debt Responsibly

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Aniplus Inc. (KOSDAQ:310200) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

We check all companies for important risks. See what we found for Aniplus in our free report.

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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.

What Is Aniplus's Net Debt?

As you can see below, at the end of December 2024, Aniplus had ₩52.7b of debt, up from ₩45.2b a year ago. Click the image for more detail. However, its balance sheet shows it holds ₩56.3b in cash, so it actually has ₩3.60b net cash.

How Healthy Is Aniplus' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Aniplus had liabilities of ₩82.5b due within 12 months and liabilities of ₩44.0b due beyond that. On the other hand, it had cash of ₩56.3b and ₩22.0b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩48.2b.

Aniplus has a market capitalization of ₩165.7b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. Despite its noteworthy liabilities, Aniplus boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Aniplus

If Aniplus can keep growing EBIT at last year's rate of 12% over the last year, then it will find its debt load easier to manage. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Aniplus can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Aniplus 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. Looking at the most recent three years, Aniplus recorded free cash flow of 39% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While Aniplus does have more liabilities than liquid assets, it also has net cash of ₩3.60b. And it also grew its EBIT by 12% over the last year. So we are not troubled with Aniplus's debt use. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Aniplus's earnings per share history for free.

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.