Is OHEIM& CompanyLtd (KOSDAQ:309930) A Risky Investment?

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 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. As with many other companies OHEIM& Company Co.,Ltd. (KOSDAQ:309930) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is OHEIM& CompanyLtd's Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 OHEIM& CompanyLtd had ₩7.75b of debt, an increase on none, over one year. But on the other hand it also has ₩25.8b in cash, leading to a ₩18.0b net cash position.

A Look At OHEIM& CompanyLtd's Liabilities

The latest balance sheet data shows that OHEIM& CompanyLtd had liabilities of ₩20.9b due within a year, and liabilities of ₩885.9m falling due after that. Offsetting these obligations, it had cash of ₩25.8b as well as receivables valued at ₩6.18b due within 12 months. So it actually has ₩10.1b more liquid assets than total liabilities.

It's good to see that OHEIM& CompanyLtd has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that OHEIM& CompanyLtd has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since OHEIM& CompanyLtd will need earnings to service that debt. 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 OHEIM& CompanyLtd

Over 12 months, OHEIM& CompanyLtd reported revenue of ₩47b, which is a gain of 15%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is OHEIM& CompanyLtd?

Although OHEIM& CompanyLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of ₩1.4b. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short 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. Be aware that OHEIM& CompanyLtd is showing 4 warning signs in our investment analysis , you should know about...

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.