Does Worldex Industry & Trading (KOSDAQ:101160) Have A Healthy Balance Sheet?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Worldex Industry & Trading Co., Ltd. (KOSDAQ:101160) does use debt in its business. But the more important question is: how much risk is that debt creating?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. 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.

What Is Worldex Industry & Trading's Net Debt?

The image below, which you can click on for greater detail, shows that Worldex Industry & Trading had debt of ₩40.0b at the end of June 2025, a reduction from ₩43.2b over a year. However, it does have ₩175.8b in cash offsetting this, leading to net cash of ₩135.8b.

A Look At Worldex Industry & Trading's Liabilities

We can see from the most recent balance sheet that Worldex Industry & Trading had liabilities of ₩67.3b falling due within a year, and liabilities of ₩20.6b due beyond that. Offsetting these obligations, it had cash of ₩175.8b as well as receivables valued at ₩35.4b due within 12 months. So it actually has ₩123.2b more liquid assets than total liabilities.

This surplus liquidity suggests that Worldex Industry & Trading's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Worldex Industry & Trading has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Worldex Industry & Trading

On the other hand, Worldex Industry & Trading saw its EBIT drop by 9.8% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Worldex Industry & Trading 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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Worldex Industry & Trading 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 most recent three years, Worldex Industry & Trading recorded free cash flow worth 72% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Worldex Industry & Trading has net cash of ₩135.8b, as well as more liquid assets than liabilities. The cherry on top was that in converted 72% of that EBIT to free cash flow, bringing in ₩56b. So we don't think Worldex Industry & Trading's use of debt is risky. 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. Be aware that Worldex Industry & Trading is showing 1 warning sign in our investment analysis , you should know about...

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.

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

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.