CUBOX (KOSDAQ:340810) Is Carrying A Fair Bit Of Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 CUBOX Co., Ltd (KOSDAQ:340810) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is CUBOX's Net Debt?

The image below, which you can click on for greater detail, shows that CUBOX had debt of ₩6.74b at the end of March 2025, a reduction from ₩12.6b over a year. On the flip side, it has ₩3.81b in cash leading to net debt of about ₩2.93b.

How Strong Is CUBOX's Balance Sheet?

We can see from the most recent balance sheet that CUBOX had liabilities of ₩15.5b falling due within a year, and liabilities of ₩1.11b due beyond that. Offsetting these obligations, it had cash of ₩3.81b as well as receivables valued at ₩554.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩12.3b.

CUBOX has a market capitalization of ₩42.0b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since CUBOX 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.

View our latest analysis for CUBOX

In the last year CUBOX had a loss before interest and tax, and actually shrunk its revenue by 8.5%, to ₩13b. We would much prefer see growth.

Caveat Emptor

Over the last twelve months CUBOX produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping ₩10.0b. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩7.9b of cash over the last year. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 6 warning signs for CUBOX (3 are a bit unpleasant) you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.