Is ASFLOW (KOSDAQ:159010) A Risky Investment?

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.' 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 ASFLOW Co., LTD. (KOSDAQ:159010) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is ASFLOW's Debt?

The image below, which you can click on for greater detail, shows that at September 2025 ASFLOW had debt of ₩66.2b, up from ₩62.0b in one year. However, because it has a cash reserve of ₩31.2b, its net debt is less, at about ₩35.0b.

A Look At ASFLOW's Liabilities

The latest balance sheet data shows that ASFLOW had liabilities of ₩73.1b due within a year, and liabilities of ₩6.97b falling due after that. Offsetting this, it had ₩31.2b in cash and ₩15.1b in receivables that were due within 12 months. So its liabilities total ₩33.8b more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of ₩55.6b. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since ASFLOW 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 ASFLOW

Over 12 months, ASFLOW made a loss at the EBIT level, and saw its revenue drop to ₩76b, which is a fall of 8.6%. We would much prefer see growth.

Caveat Emptor

Importantly, ASFLOW had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₩5.7b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. We would feel better if it turned its trailing twelve month loss of ₩7.0b into a profit. So to be blunt we do think it is risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that ASFLOW is showing 4 warning signs in our investment analysis , and 2 of those are a bit concerning...

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.