Global Standard Technology (KOSDAQ:083450) Has A Rock Solid Balance Sheet

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Global Standard Technology, Limited (KOSDAQ:083450) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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.

How Much Debt Does Global Standard Technology Carry?

The image below, which you can click on for greater detail, shows that at June 2025 Global Standard Technology had debt of ₩12.6b, up from ₩10.7b in one year. However, it does have ₩113.2b in cash offsetting this, leading to net cash of ₩100.6b.

How Healthy Is Global Standard Technology's Balance Sheet?

The latest balance sheet data shows that Global Standard Technology had liabilities of ₩52.2b due within a year, and liabilities of ₩7.94b falling due after that. Offsetting this, it had ₩113.2b in cash and ₩51.3b in receivables that were due within 12 months. So it actually has ₩104.4b more liquid assets than total liabilities.

This surplus suggests that Global Standard Technology is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that Global Standard Technology has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Global Standard Technology

The good news is that Global Standard Technology has increased its EBIT by 5.2% over twelve months, which should ease any concerns about debt repayment. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Global Standard Technology'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 business needs free cash flow to pay off debt; accounting profits just don't cut it. Global Standard Technology may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, Global Standard Technology recorded free cash flow worth 59% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Global Standard Technology has net cash of ₩100.6b, as well as more liquid assets than liabilities. So we don't think Global Standard Technology's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Global Standard Technology, you may well want to click here to check an interactive graph of its earnings per share history.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.