We Think DUKSAN TECHOPIALtd (KOSDAQ:317330) Has A Fair Chunk Of Debt

Warren Buffett famously said, '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 can see that DUKSAN TECHOPIA Co.,Ltd. (KOSDAQ:317330) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for DUKSAN TECHOPIALtd

How Much Debt Does DUKSAN TECHOPIALtd Carry?

The image below, which you can click on for greater detail, shows that at June 2024 DUKSAN TECHOPIALtd had debt of ₩251.9b, up from ₩138.1b in one year. However, it does have ₩155.3b in cash offsetting this, leading to net debt of about ₩96.6b.

How Strong Is DUKSAN TECHOPIALtd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that DUKSAN TECHOPIALtd had liabilities of ₩319.2b due within 12 months and liabilities of ₩113.9b due beyond that. On the other hand, it had cash of ₩155.3b and ₩9.75b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩268.1b.

DUKSAN TECHOPIALtd has a market capitalization of ₩909.4b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. 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 ₩97b, which is a fall of 6.4%. We would much prefer see growth.

Caveat Emptor

Over the last twelve months DUKSAN TECHOPIALtd produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₩18b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much 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 ₩156b 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. Case in point: We've spotted 3 warning signs for DUKSAN TECHOPIALtd you should be aware of, and 2 of them are significant.

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.