Does GIGALANELtd (KOSDAQ:049080) Have A Healthy Balance Sheet?

Warren Buffett famously said, '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. We can see that GIGALANE Co.,Ltd. (KOSDAQ:049080) does use debt in its business. But is this debt a concern to shareholders?

When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for GIGALANELtd

How Much Debt Does GIGALANELtd Carry?

The image below, which you can click on for greater detail, shows that GIGALANELtd had debt of ₩13.4b at the end of March 2024, a reduction from ₩14.5b over a year. But on the other hand it also has ₩21.6b in cash, leading to a ₩8.23b net cash position.

How Healthy Is GIGALANELtd's Balance Sheet?

We can see from the most recent balance sheet that GIGALANELtd had liabilities of ₩21.4b falling due within a year, and liabilities of ₩7.87b due beyond that. Offsetting these obligations, it had cash of ₩21.6b as well as receivables valued at ₩8.53b due within 12 months. So it actually has ₩877.7m more liquid assets than total liabilities.

This state of affairs indicates that GIGALANELtd's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₩74.9b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, GIGALANELtd 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 you can't view debt in total isolation; since GIGALANELtd 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.

Over 12 months, GIGALANELtd made a loss at the EBIT level, and saw its revenue drop to ₩42b, which is a fall of 26%. That makes us nervous, to say the least.

So How Risky Is GIGALANELtd?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year GIGALANELtd had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of ₩1.3b and booked a ₩12b accounting loss. But the saving grace is the ₩8.23b on the balance sheet. 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. 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 - GIGALANELtd has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com