Does SOLiD (KOSDAQ:050890) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 SOLiD, Inc. (KOSDAQ:050890) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is SOLiD's Net Debt?

You can click the graphic below for the historical numbers, but it shows that SOLiD had ₩93.2b of debt in September 2025, down from ₩97.6b, one year before. But it also has ₩117.9b in cash to offset that, meaning it has ₩24.7b net cash.

How Healthy Is SOLiD's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that SOLiD had liabilities of ₩158.0b due within 12 months and liabilities of ₩25.2b due beyond that. On the other hand, it had cash of ₩117.9b and ₩39.3b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩26.0b.

Given SOLiD has a market capitalization of ₩530.5b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, SOLiD boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for SOLiD

It is just as well that SOLiD's load is not too heavy, because its EBIT was down 57% over the last year. Falling earnings (if the trend continues) could eventually make even modest debt quite risky. There's no doubt that we learn most about debt from the balance sheet. But it is SOLiD'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While SOLiD has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, SOLiD actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

We could understand if investors are concerned about SOLiD's liabilities, but we can be reassured by the fact it has has net cash of ₩24.7b. The cherry on top was that in converted 136% of that EBIT to free cash flow, bringing in ₩38b. So we don't have any problem with SOLiD's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 1 warning sign for SOLiD that you should be aware of.

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.