Is T ScientificLtd (KOSDAQ:057680) Using Debt In A Risky Way?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We can see that T Scientific Co.,Ltd. (KOSDAQ:057680) does use debt in its business. But is this debt a concern to shareholders?

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. 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, 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is T ScientificLtd's Debt?

The image below, which you can click on for greater detail, shows that T ScientificLtd had debt of ₩8.07b at the end of March 2025, a reduction from ₩15.1b over a year. However, its balance sheet shows it holds ₩15.2b in cash, so it actually has ₩7.17b net cash.

How Strong Is T ScientificLtd's Balance Sheet?

According to the last reported balance sheet, T ScientificLtd had liabilities of ₩15.4b due within 12 months, and liabilities of ₩7.31b due beyond 12 months. Offsetting these obligations, it had cash of ₩15.2b as well as receivables valued at ₩8.66b due within 12 months. So it can boast ₩1.22b more liquid assets than total liabilities.

Having regard to T ScientificLtd's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₩67.0b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, T ScientificLtd 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 you can't view debt in total isolation; since T ScientificLtd 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 T ScientificLtd

In the last year T ScientificLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 29%, to ₩41b. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is T ScientificLtd?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months T ScientificLtd lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩9.0b and booked a ₩13b accounting loss. But at least it has ₩7.17b on the balance sheet to spend on growth, near-term. T ScientificLtd's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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. Case in point: We've spotted 2 warning signs for T ScientificLtd you should be aware of, and 1 of them is a bit unpleasant.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.