Would Ace Technologies (KOSDAQ:088800) Be Better Off With Less Debt?

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.' 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. Importantly, Ace Technologies Corp. (KOSDAQ:088800) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Ace Technologies's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Ace Technologies had ₩53.7b of debt in March 2025, down from ₩134.8b, one year before. However, it does have ₩16.0b in cash offsetting this, leading to net debt of about ₩37.6b.

How Healthy Is Ace Technologies' Balance Sheet?

The latest balance sheet data shows that Ace Technologies had liabilities of ₩191.8b due within a year, and liabilities of ₩6.36b falling due after that. Offsetting these obligations, it had cash of ₩16.0b as well as receivables valued at ₩77.5b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩104.6b.

While this might seem like a lot, it is not so bad since Ace Technologies has a market capitalization of ₩188.5b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Ace Technologies will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Ace Technologies

In the last year Ace Technologies wasn't profitable at an EBIT level, but managed to grow its revenue by 33%, to ₩167b. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, Ace Technologies still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₩29b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of ₩42b into a profit. In the meantime, we consider the stock very risky. 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 example, we've discovered 2 warning signs for Ace Technologies that you should be aware of before investing here.

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.