Would Ram Technology (KOSDAQ:171010) Be Better Off With Less Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 note that Ram Technology Co., Ltd (KOSDAQ:171010) does have debt on its balance sheet. But is this debt a concern to shareholders?

We've discovered 3 warning signs about Ram Technology. View them for free.

Why Does Debt Bring Risk?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Ram Technology's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Ram Technology had ₩55.1b of debt, an increase on ₩48.1b, over one year. However, because it has a cash reserve of ₩16.9b, its net debt is less, at about ₩38.2b.

A Look At Ram Technology's Liabilities

According to the last reported balance sheet, Ram Technology had liabilities of ₩29.8b due within 12 months, and liabilities of ₩28.6b due beyond 12 months. Offsetting these obligations, it had cash of ₩16.9b as well as receivables valued at ₩3.55b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩37.9b.

This deficit is considerable relative to its market capitalization of ₩62.1b, so it does suggest shareholders should keep an eye on Ram Technology's use of debt. 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 Ram Technology 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.

See our latest analysis for Ram Technology

Over 12 months, Ram Technology saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

Caveat Emptor

Over the last twelve months Ram Technology produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₩958m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩6.7b of cash over the last year. So in short it's a really risky stock. 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. For example Ram Technology has 3 warning signs (and 2 which are potentially serious) we think you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.