These 4 Measures Indicate That Aligned Genetics (KOSDAQ:238120) Is Using Debt Safely

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 Aligned Genetics, Inc. (KOSDAQ:238120) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Aligned Genetics's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Aligned Genetics had ₩2.40b of debt in June 2025, down from ₩3.90b, one year before. However, it does have ₩17.0b in cash offsetting this, leading to net cash of ₩14.6b.

A Look At Aligned Genetics' Liabilities

According to the last reported balance sheet, Aligned Genetics had liabilities of ₩2.01b due within 12 months, and liabilities of ₩6.94b due beyond 12 months. Offsetting these obligations, it had cash of ₩17.0b as well as receivables valued at ₩2.68b due within 12 months. So it can boast ₩10.7b more liquid assets than total liabilities.

It's good to see that Aligned Genetics has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Aligned Genetics boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Aligned Genetics

Fortunately, Aligned Genetics grew its EBIT by 8.9% in the last year, making that debt load look even more manageable. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Aligned Genetics'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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Aligned Genetics 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. Over the most recent three years, Aligned Genetics recorded free cash flow worth 64% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Aligned Genetics has ₩14.6b in net cash and a decent-looking balance sheet. So we don't think Aligned Genetics's use of debt is risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Aligned Genetics you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.