Is Sungwoo Techron. Co.Ltd (KOSDAQ:045300) Using Too Much Debt?

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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Sungwoo Techron. Co,.Ltd (KOSDAQ:045300) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Sungwoo Techron. Co.Ltd Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Sungwoo Techron. Co.Ltd had ₩13.4b of debt, an increase on ₩11.9b, over one year. However, it does have ₩17.1b in cash offsetting this, leading to net cash of ₩3.61b.

How Strong Is Sungwoo Techron. Co.Ltd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Sungwoo Techron. Co.Ltd had liabilities of ₩22.1b due within 12 months and liabilities of ₩3.30b due beyond that. Offsetting these obligations, it had cash of ₩17.1b as well as receivables valued at ₩5.80b due within 12 months. So its liabilities total ₩2.54b more than the combination of its cash and short-term receivables.

Of course, Sungwoo Techron. Co.Ltd has a market capitalization of ₩31.8b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Sungwoo Techron. Co.Ltd boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Sungwoo Techron. Co.Ltd

It was also good to see that despite losing money on the EBIT line last year, Sungwoo Techron. Co.Ltd turned things around in the last 12 months, delivering and EBIT of ₩946m. When analysing debt levels, the balance sheet is the obvious place to start. But it is Sungwoo Techron. Co.Ltd'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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Sungwoo Techron. Co.Ltd 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 last year, Sungwoo Techron. Co.Ltd actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Sungwoo Techron. Co.Ltd has ₩3.61b in net cash. The cherry on top was that in converted 522% of that EBIT to free cash flow, bringing in ₩4.9b. So is Sungwoo Techron. Co.Ltd's debt a risk? It doesn't seem so to us. 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. For example Sungwoo Techron. Co.Ltd has 2 warning signs (and 1 which shouldn't be ignored) we think 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.