Is ADTechnologyLtd (KOSDAQ:200710) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. Importantly, ADTechnology Co.,Ltd. (KOSDAQ:200710) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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.

What Is ADTechnologyLtd's Net Debt?

The image below, which you can click on for greater detail, shows that ADTechnologyLtd had debt of ₩58.0b at the end of March 2025, a reduction from ₩61.0b over a year. But it also has ₩77.9b in cash to offset that, meaning it has ₩19.9b net cash.

How Strong Is ADTechnologyLtd's Balance Sheet?

According to the last reported balance sheet, ADTechnologyLtd had liabilities of ₩71.2b due within 12 months, and liabilities of ₩36.8b due beyond 12 months. On the other hand, it had cash of ₩77.9b and ₩11.3b worth of receivables due within a year. So it has liabilities totalling ₩18.8b more than its cash and near-term receivables, combined.

Given ADTechnologyLtd has a market capitalization of ₩247.2b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, ADTechnologyLtd also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since ADTechnologyLtd 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.

View our latest analysis for ADTechnologyLtd

In the last year ADTechnologyLtd had a loss before interest and tax, and actually shrunk its revenue by 3.6%, to ₩109b. We would much prefer see growth.

So How Risky Is ADTechnologyLtd?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that ADTechnologyLtd had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩27b of cash and made a loss of ₩17b. But the saving grace is the ₩19.9b on the balance sheet. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example ADTechnologyLtd has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.