Does OmnisystemLtd (KOSDAQ:057540) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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 Omnisystem Co.,Ltd. (KOSDAQ:057540) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is OmnisystemLtd's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 OmnisystemLtd had debt of ₩5.97b, up from ₩2.09b in one year. However, it does have ₩20.7b in cash offsetting this, leading to net cash of ₩14.7b.

How Healthy Is OmnisystemLtd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that OmnisystemLtd had liabilities of ₩21.0b due within 12 months and liabilities of ₩2.59b due beyond that. On the other hand, it had cash of ₩20.7b and ₩18.1b worth of receivables due within a year. So it actually has ₩15.2b more liquid assets than total liabilities.

It's good to see that OmnisystemLtd has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that OmnisystemLtd has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for OmnisystemLtd

Better yet, OmnisystemLtd grew its EBIT by 179% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But it is OmnisystemLtd'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, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While OmnisystemLtd 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. Happily for any shareholders, OmnisystemLtd 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 OmnisystemLtd has net cash of ₩14.7b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of ₩3.0b, being 124% of its EBIT. The bottom line is that we do not find OmnisystemLtd's debt levels at all concerning. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 2 warning signs we've spotted with OmnisystemLtd .

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.