JUSUNG ENGINEERINGLtd (KOSDAQ:036930) Could Easily Take On More Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 JUSUNG ENGINEERING Co.,Ltd. (KOSDAQ:036930) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is JUSUNG ENGINEERINGLtd's Net Debt?

As you can see below, JUSUNG ENGINEERINGLtd had ₩45.0b of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has ₩259.6b in cash, leading to a ₩214.6b net cash position.

How Strong Is JUSUNG ENGINEERINGLtd's Balance Sheet?

According to the last reported balance sheet, JUSUNG ENGINEERINGLtd had liabilities of ₩139.7b due within 12 months, and liabilities of ₩228.9b due beyond 12 months. Offsetting this, it had ₩259.6b in cash and ₩11.8b in receivables that were due within 12 months. So its liabilities total ₩97.2b more than the combination of its cash and short-term receivables.

Of course, JUSUNG ENGINEERINGLtd has a market capitalization of ₩1.22t, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, JUSUNG ENGINEERINGLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for JUSUNG ENGINEERINGLtd

Even more impressive was the fact that JUSUNG ENGINEERINGLtd grew its EBIT by 409% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine JUSUNG ENGINEERINGLtd's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While JUSUNG ENGINEERINGLtd 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. During the last three years, JUSUNG ENGINEERINGLtd generated free cash flow amounting to a very robust 95% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.

Summing Up

We could understand if investors are concerned about JUSUNG ENGINEERINGLtd's liabilities, but we can be reassured by the fact it has has net cash of ₩214.6b. The cherry on top was that in converted 95% of that EBIT to free cash flow, bringing in ₩141b. So is JUSUNG ENGINEERINGLtd's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in JUSUNG ENGINEERINGLtd, you may well want to click here to check an interactive graph of its earnings per share history.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.