Is Kortek (KOSDAQ:052330) A Risky Investment?

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 Kortek Corporation (KOSDAQ:052330) makes use of debt. But should shareholders be worried about its use of debt?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Kortek's Debt?

You can click the graphic below for the historical numbers, but it shows that Kortek had ₩39.0b of debt in March 2025, down from ₩46.7b, one year before. But it also has ₩131.4b in cash to offset that, meaning it has ₩92.4b net cash.

How Healthy Is Kortek's Balance Sheet?

The latest balance sheet data shows that Kortek had liabilities of ₩81.2b due within a year, and liabilities of ₩6.02b falling due after that. Offsetting these obligations, it had cash of ₩131.4b as well as receivables valued at ₩81.5b due within 12 months. So it can boast ₩125.6b more liquid assets than total liabilities.

This surplus liquidity suggests that Kortek's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Simply put, the fact that Kortek has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Kortek

Even more impressive was the fact that Kortek grew its EBIT by 613% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Kortek's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Kortek may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, Kortek actually produced more free cash flow than EBIT over the last three years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Kortek has net cash of ₩92.4b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of ₩4.7b, being 170% of its EBIT. At the end of the day we're not concerned about Kortek's debt. 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. We've identified 2 warning signs with Kortek , and understanding them should be part of your investment process.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.