Does Openedges Technology (KOSDAQ:394280) 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.' 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. As with many other companies Openedges Technology, Inc. (KOSDAQ:394280) makes use of debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Openedges Technology Carry?

The chart below, which you can click on for greater detail, shows that Openedges Technology had ₩15.0b in debt in December 2024; about the same as the year before. However, it does have ₩66.2b in cash offsetting this, leading to net cash of ₩51.2b.

How Healthy Is Openedges Technology's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Openedges Technology had liabilities of ₩21.5b due within 12 months and liabilities of ₩4.43b due beyond that. Offsetting this, it had ₩66.2b in cash and ₩2.92b in receivables that were due within 12 months. So it can boast ₩43.2b more liquid assets than total liabilities.

It's good to see that Openedges Technology has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that Openedges Technology has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Openedges Technology can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Openedges Technology

Over 12 months, Openedges Technology made a loss at the EBIT level, and saw its revenue drop to ₩15b, which is a fall of 22%. That makes us nervous, to say the least.

So How Risky Is Openedges Technology?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Openedges Technology had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩11b of cash and made a loss of ₩27b. But the saving grace is the ₩51.2b on the balance sheet. That means it could keep spending at its current rate for more than two years. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. For instance, we've identified 1 warning sign for Openedges Technology that you should be aware of.

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.