Does DUKSAN TECHOPIALtd (KOSDAQ:317330) 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that DUKSAN TECHOPIA Co.,Ltd. (KOSDAQ:317330) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for DUKSAN TECHOPIALtd

What Is DUKSAN TECHOPIALtd's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2023 DUKSAN TECHOPIALtd had ₩196.0b of debt, an increase on ₩68.9b, over one year. However, it does have ₩58.9b in cash offsetting this, leading to net debt of about ₩137.0b.

How Healthy Is DUKSAN TECHOPIALtd's Balance Sheet?

We can see from the most recent balance sheet that DUKSAN TECHOPIALtd had liabilities of ₩249.7b falling due within a year, and liabilities of ₩80.4b due beyond that. Offsetting this, it had ₩58.9b in cash and ₩10.0b in receivables that were due within 12 months. So it has liabilities totalling ₩261.1b more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since DUKSAN TECHOPIALtd has a market capitalization of ₩740.1b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But it is DUKSAN TECHOPIALtd'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.

Over 12 months, DUKSAN TECHOPIALtd made a loss at the EBIT level, and saw its revenue drop to ₩94b, which is a fall of 15%. That's not what we would hope to see.

Caveat Emptor

While DUKSAN TECHOPIALtd's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at ₩6.2b. 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩157b of cash over the last year. So suffice it to say we consider the stock very risky. 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. For instance, we've identified 4 warning signs for DUKSAN TECHOPIALtd (3 don't sit too well with us) you should be aware of.

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.