Here's Why NuriFlexLtd (KOSDAQ:040160) Can Afford Some Debt

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. As with many other companies NuriFlex Co.,Ltd. (KOSDAQ:040160) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

What Is NuriFlexLtd's Debt?

You can click the graphic below for the historical numbers, but it shows that NuriFlexLtd had ₩30.8b of debt in March 2025, down from ₩32.6b, one year before. However, it does have ₩22.2b in cash offsetting this, leading to net debt of about ₩8.65b.

How Healthy Is NuriFlexLtd's Balance Sheet?

The latest balance sheet data shows that NuriFlexLtd had liabilities of ₩77.6b due within a year, and liabilities of ₩5.24b falling due after that. Offsetting these obligations, it had cash of ₩22.2b as well as receivables valued at ₩63.5b due within 12 months. So it can boast ₩2.78b more liquid assets than total liabilities.

This short term liquidity is a sign that NuriFlexLtd could probably pay off its debt with ease, as its balance sheet is far from stretched. There's no doubt that we learn most about debt from the balance sheet. But it is NuriFlexLtd'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 NuriFlexLtd

Over 12 months, NuriFlexLtd reported revenue of ₩133b, which is a gain of 14%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, NuriFlexLtd had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₩4.7b. On a more positive note, the company does have liquid assets, so it has a bit of time to improve its operations before the debt becomes an acute problem. Still, we'd be more encouraged to study the business in depth if it already had some free cash flow. This one is a bit too risky for our liking. 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. To that end, you should learn about the 3 warning signs we've spotted with NuriFlexLtd (including 1 which shouldn't be ignored) .

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.

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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.