Here's Why TaesungLtd (KOSDAQ:323280) Can Manage Its Debt Responsibly

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Taesung Co.,Ltd. (KOSDAQ:323280) does carry debt. But the more important question is: how much risk is that debt creating?

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

How Much Debt Does TaesungLtd Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 TaesungLtd had ₩20.9b of debt, an increase on ₩9.20b, over one year. However, its balance sheet shows it holds ₩90.9b in cash, so it actually has ₩70.0b net cash.

A Look At TaesungLtd's Liabilities

We can see from the most recent balance sheet that TaesungLtd had liabilities of ₩17.3b falling due within a year, and liabilities of ₩16.6b due beyond that. Offsetting this, it had ₩90.9b in cash and ₩10.4b in receivables that were due within 12 months. So it can boast ₩67.4b more liquid assets than total liabilities.

This short term liquidity is a sign that TaesungLtd could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that TaesungLtd has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for TaesungLtd

Better yet, TaesungLtd grew its EBIT by 106% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since TaesungLtd will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. TaesungLtd 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. During the last three years, TaesungLtd burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that TaesungLtd has net cash of ₩70.0b, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 106% over the last year. So we don't have any problem with TaesungLtd'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. To that end, you should learn about the 4 warning signs we've spotted with TaesungLtd (including 2 which are potentially serious) .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.