Curiox Biosystems (KOSDAQ:445680) Has Debt But No Earnings; Should You Worry?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Curiox Biosystems Co., Ltd (KOSDAQ:445680) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Curiox Biosystems

What Is Curiox Biosystems's Net Debt?

As you can see below, at the end of September 2024, Curiox Biosystems had ₩7.00b of debt, up from none a year ago. Click the image for more detail. However, its balance sheet shows it holds ₩30.1b in cash, so it actually has ₩23.1b net cash.

How Strong Is Curiox Biosystems' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Curiox Biosystems had liabilities of ₩24.6b due within 12 months and liabilities of ₩2.02b due beyond that. Offsetting these obligations, it had cash of ₩30.1b as well as receivables valued at ₩882.3m due within 12 months. So it can boast ₩4.37b more liquid assets than total liabilities.

This state of affairs indicates that Curiox Biosystems' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₩323.5b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, Curiox Biosystems 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 Curiox Biosystems'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.

In the last year Curiox Biosystems had a loss before interest and tax, and actually shrunk its revenue by 16%, to ₩6.0b. That's not what we would hope to see.

So How Risky Is Curiox Biosystems?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Curiox Biosystems had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩10b and booked a ₩12b accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₩23.1b. 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. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with Curiox Biosystems (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

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.