Is Kec (KRX:092220) Using Too Much Debt?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. As with many other companies Kec Corporation (KRX:092220) makes use of debt. But should shareholders be worried about its use of debt?

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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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. 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 Kec Carry?

The chart below, which you can click on for greater detail, shows that Kec had ₩46.4b in debt in June 2025; about the same as the year before. However, its balance sheet shows it holds ₩107.5b in cash, so it actually has ₩61.1b net cash.

A Look At Kec's Liabilities

According to the last reported balance sheet, Kec had liabilities of ₩78.6b due within 12 months, and liabilities of ₩31.5b due beyond 12 months. On the other hand, it had cash of ₩107.5b and ₩30.8b worth of receivables due within a year. So it actually has ₩28.2b more liquid assets than total liabilities.

It's good to see that Kec 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 Kec 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 you can't view debt in total isolation; since Kec 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.

See our latest analysis for Kec

In the last year Kec wasn't profitable at an EBIT level, but managed to grow its revenue by 5.1%, to ₩238b. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Kec?

Although Kec had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₩6.2b. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 1 warning sign we've spotted with Kec .

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.