Is Korea Robot ManufacturingLtd (KOSDAQ:093640) Using Debt In A Risky Way?

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. We can see that Korea Robot Manufacturing Co.,Ltd. (KOSDAQ:093640) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Korea Robot ManufacturingLtd Carry?

As you can see below, Korea Robot ManufacturingLtd had ₩57.9b of debt at December 2024, down from ₩105.9b a year prior. However, its balance sheet shows it holds ₩82.5b in cash, so it actually has ₩24.6b net cash.

How Strong Is Korea Robot ManufacturingLtd's Balance Sheet?

We can see from the most recent balance sheet that Korea Robot ManufacturingLtd had liabilities of ₩40.5b falling due within a year, and liabilities of ₩24.4b due beyond that. On the other hand, it had cash of ₩82.5b and ₩693.7m worth of receivables due within a year. So it can boast ₩18.3b more liquid assets than total liabilities.

This excess liquidity suggests that Korea Robot ManufacturingLtd is taking a careful approach to debt. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, Korea Robot ManufacturingLtd 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 Korea Robot ManufacturingLtd will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Korea Robot ManufacturingLtd

Over 12 months, Korea Robot ManufacturingLtd made a loss at the EBIT level, and saw its revenue drop to ₩11b, which is a fall of 9.8%. That's not what we would hope to see.

So How Risky Is Korea Robot ManufacturingLtd?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Korea Robot ManufacturingLtd had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩12b of cash and made a loss of ₩26b. While this does make the company a bit risky, it's important to remember it has net cash of ₩24.6b. That means it could keep spending at its current rate for more than two years. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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 Korea Robot ManufacturingLtd has 3 warning signs (and 2 which are potentially serious) we think you should know about.

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.