JTC (KOSDAQ:950170) Could Easily Take On More Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. We note that JTC Inc. (KOSDAQ:950170) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is JTC's Debt?

As you can see below, JTC had ₩13.0b of debt at February 2025, down from ₩21.0b a year prior. However, it does have ₩79.8b in cash offsetting this, leading to net cash of ₩66.8b.

How Strong Is JTC's Balance Sheet?

We can see from the most recent balance sheet that JTC had liabilities of ₩43.3b falling due within a year, and liabilities of ₩131.9b due beyond that. Offsetting these obligations, it had cash of ₩79.8b as well as receivables valued at ₩15.9b due within 12 months. So its liabilities total ₩79.5b more than the combination of its cash and short-term receivables.

This deficit isn't so bad because JTC is worth ₩362.7b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. While it does have liabilities worth noting, JTC also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for JTC

Better yet, JTC grew its EBIT by 157% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine JTC's ability to maintain a healthy balance sheet going forward. 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 JTC 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. Happily for any shareholders, JTC actually produced more free cash flow than EBIT over the last two years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

Although JTC's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₩66.8b. The cherry on top was that in converted 144% of that EBIT to free cash flow, bringing in ₩44b. So is JTC's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for JTC (2 are a bit unpleasant) you should be aware of.

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.