Is GigaVis (KOSDAQ:420770) Using Debt Sensibly?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We note that GigaVis Co., Ltd. (KOSDAQ:420770) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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

What Is GigaVis's Net Debt?

As you can see below, GigaVis had ₩20.0b of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has ₩95.6b in cash, leading to a ₩75.6b net cash position.

How Healthy Is GigaVis' Balance Sheet?

We can see from the most recent balance sheet that GigaVis had liabilities of ₩16.4b falling due within a year, and liabilities of ₩20.1b due beyond that. Offsetting this, it had ₩95.6b in cash and ₩16.9b in receivables that were due within 12 months. So it can boast ₩76.0b more liquid assets than total liabilities.

This surplus suggests that GigaVis is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, GigaVis boasts net cash, so it's fair to say it does not have a heavy debt load! 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 GigaVis 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 GigaVis

Over 12 months, GigaVis made a loss at the EBIT level, and saw its revenue drop to ₩24b, which is a fall of 49%. That makes us nervous, to say the least.

So How Risky Is GigaVis?

Although GigaVis had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of ₩3.4b. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for GigaVis you should know about.

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.