These 4 Measures Indicate That TEMC CNS (KOSDAQ:241790) Is Using Debt Reasonably Well

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 TEMC CNS Co., Ltd. (KOSDAQ:241790) does use debt in its business. But should shareholders be worried about its use of debt?

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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. 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 think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does TEMC CNS Carry?

As you can see below, at the end of June 2025, TEMC CNS had ₩20.4b of debt, up from ₩18.5b a year ago. Click the image for more detail. But it also has ₩21.3b in cash to offset that, meaning it has ₩867.0m net cash.

How Strong Is TEMC CNS' Balance Sheet?

According to the last reported balance sheet, TEMC CNS had liabilities of ₩42.6b due within 12 months, and liabilities of ₩1.32b due beyond 12 months. Offsetting these obligations, it had cash of ₩21.3b as well as receivables valued at ₩15.1b due within 12 months. So its liabilities total ₩7.49b more than the combination of its cash and short-term receivables.

Given TEMC CNS has a market capitalization of ₩74.8b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, TEMC CNS boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for TEMC CNS

Even more impressive was the fact that TEMC CNS grew its EBIT by 223% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But it is TEMC CNS's earnings that will influence how the balance sheet holds up in the future. 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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. TEMC CNS 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. In the last three years, TEMC CNS's free cash flow amounted to 35% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

Although TEMC CNS's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₩867.0m. And it impressed us with its EBIT growth of 223% over the last year. So is TEMC CNS's debt a risk? It doesn't seem so to us. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for TEMC CNS (of which 1 can't be ignored!) 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.