Does KwangmuLtd (KOSDAQ:029480) Have A Healthy Balance Sheet?

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.' 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 Kwangmu Co.,Ltd. (KOSDAQ:029480) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is KwangmuLtd's Debt?

As you can see below, at the end of March 2025, KwangmuLtd had ₩19.5b of debt, up from ₩8.23b a year ago. Click the image for more detail. However, it does have ₩165.6b in cash offsetting this, leading to net cash of ₩146.1b.

How Healthy Is KwangmuLtd's Balance Sheet?

The latest balance sheet data shows that KwangmuLtd had liabilities of ₩31.9b due within a year, and liabilities of ₩11.3b falling due after that. Offsetting these obligations, it had cash of ₩165.6b as well as receivables valued at ₩6.17b due within 12 months. So it actually has ₩128.6b more liquid assets than total liabilities.

This excess liquidity is a great indication that KwangmuLtd's balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, KwangmuLtd 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 it is KwangmuLtd's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for KwangmuLtd

Over 12 months, KwangmuLtd made a loss at the EBIT level, and saw its revenue drop to ₩6.4b, which is a fall of 69%. That makes us nervous, to say the least.

So How Risky Is KwangmuLtd?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months KwangmuLtd lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through ₩9.9b of cash and made a loss of ₩29b. Given it only has net cash of ₩146.1b, the company may need to raise more capital if it doesn't reach break-even soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. To that end, you should be aware of the 4 warning signs we've spotted with KwangmuLtd .

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.