Does SUNIC SYSTEM (KOSDAQ:171090) 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 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. As with many other companies SUNIC SYSTEM Co., Ltd. (KOSDAQ:171090) makes use of debt. 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is SUNIC SYSTEM's Debt?

The image below, which you can click on for greater detail, shows that at September 2025 SUNIC SYSTEM had debt of ₩90.8b, up from ₩65.8b in one year. But on the other hand it also has ₩105.7b in cash, leading to a ₩14.9b net cash position.

How Strong Is SUNIC SYSTEM's Balance Sheet?

The latest balance sheet data shows that SUNIC SYSTEM had liabilities of ₩228.1b due within a year, and liabilities of ₩24.2b falling due after that. Offsetting these obligations, it had cash of ₩105.7b as well as receivables valued at ₩10.4b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩136.2b.

SUNIC SYSTEM has a market capitalization of ₩494.8b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, SUNIC SYSTEM also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for SUNIC SYSTEM

Even more impressive was the fact that SUNIC SYSTEM grew its EBIT by 651% over twelve months. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine SUNIC SYSTEM's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. SUNIC SYSTEM 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. Considering the last two years, SUNIC SYSTEM actually recorded a cash outflow, overall. Debt is far more risky for companies with unreliable free cash flow, so shareholders should be hoping that the past expenditure will produce free cash flow in the future.

Summing Up

Although SUNIC SYSTEM's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₩14.9b. And it impressed us with its EBIT growth of 651% over the last year. So we don't have any problem with SUNIC SYSTEM's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 1 warning sign with SUNIC SYSTEM , and understanding them should be part of your investment process.

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.

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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.