Does Carriesoft (KOSDAQ:317530) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, Carriesoft Co., Ltd. (KOSDAQ:317530) does carry debt. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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.

What Is Carriesoft's Debt?

As you can see below, Carriesoft had ₩4.39b of debt, at December 2024, which is about the same as the year before. You can click the chart for greater detail. But it also has ₩9.01b in cash to offset that, meaning it has ₩4.62b net cash.

How Healthy Is Carriesoft's Balance Sheet?

The latest balance sheet data shows that Carriesoft had liabilities of ₩5.77b due within a year, and liabilities of ₩507.2m falling due after that. Offsetting these obligations, it had cash of ₩9.01b as well as receivables valued at ₩734.2m due within 12 months. So it can boast ₩3.47b more liquid assets than total liabilities.

This surplus suggests that Carriesoft has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Carriesoft boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is Carriesoft's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Carriesoft

Over 12 months, Carriesoft made a loss at the EBIT level, and saw its revenue drop to ₩5.7b, which is a fall of 33%. To be frank that doesn't bode well.

So How Risky Is Carriesoft?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Carriesoft had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩2.6b of cash and made a loss of ₩4.7b. While this does make the company a bit risky, it's important to remember it has net cash of ₩4.62b. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 4 warning signs with Carriesoft (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.