Is UJU Electronics (KOSDAQ:065680) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that UJU Electronics Co. Ltd (KOSDAQ:065680) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is UJU Electronics's Debt?

As you can see below, UJU Electronics had ₩54.4b of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have ₩177.9b in cash offsetting this, leading to net cash of ₩123.5b.

How Strong Is UJU Electronics' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that UJU Electronics had liabilities of ₩71.6b due within 12 months and liabilities of ₩7.32b due beyond that. Offsetting this, it had ₩177.9b in cash and ₩25.5b in receivables that were due within 12 months. So it can boast ₩124.6b more liquid assets than total liabilities.

This excess liquidity is a great indication that UJU Electronics' balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that UJU Electronics has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for UJU Electronics

In addition to that, we're happy to report that UJU Electronics has boosted its EBIT by 45%, thus reducing the spectre of future debt repayments. The balance sheet is clearly the area to focus on when you are analysing debt. But it is UJU Electronics'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. UJU Electronics 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. Over the most recent three years, UJU Electronics recorded free cash flow worth 79% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that UJU Electronics has net cash of ₩123.5b, as well as more liquid assets than liabilities. And we liked the look of last year's 45% year-on-year EBIT growth. When it comes to UJU Electronics's debt, we sufficiently relaxed that our mind turns to the jacuzzi. Over time, share prices tend to follow earnings per share, so if you're interested in UJU Electronics, you may well want to click here to check an interactive graph of its earnings per share history.

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.