Is Lightron Fiber-Optic Devices (KOSDAQ:069540) Using Debt Sensibly?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Lightron Fiber-Optic Devices Inc. (KOSDAQ:069540) makes use of debt. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Lightron Fiber-Optic Devices Carry?

You can click the graphic below for the historical numbers, but it shows that Lightron Fiber-Optic Devices had ₩12.5b of debt in December 2024, down from ₩16.8b, one year before. However, it does have ₩19.5b in cash offsetting this, leading to net cash of ₩7.00b.

How Strong Is Lightron Fiber-Optic Devices' Balance Sheet?

The latest balance sheet data shows that Lightron Fiber-Optic Devices had liabilities of ₩15.7b due within a year, and liabilities of ₩3.38b falling due after that. On the other hand, it had cash of ₩19.5b and ₩4.06b worth of receivables due within a year. So it actually has ₩4.49b more liquid assets than total liabilities.

This surplus suggests that Lightron Fiber-Optic Devices has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Lightron Fiber-Optic Devices boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is Lightron Fiber-Optic Devices'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.

Check out our latest analysis for Lightron Fiber-Optic Devices

In the last year Lightron Fiber-Optic Devices had a loss before interest and tax, and actually shrunk its revenue by 16%, to ₩18b. We would much prefer see growth.

So How Risky Is Lightron Fiber-Optic Devices?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Lightron Fiber-Optic Devices had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩6.0b of cash and made a loss of ₩19b. While this does make the company a bit risky, it's important to remember it has net cash of ₩7.00b. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Lightron Fiber-Optic Devices (of which 3 make us uncomfortable!) you should know about.

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.