Is EM-Tech.CO (KOSDAQ:091120) Using Too Much Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, EM-Tech.CO., LTD. (KOSDAQ:091120) does carry debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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 EM-Tech.CO's Debt?

You can click the graphic below for the historical numbers, but it shows that EM-Tech.CO had ₩106.7b of debt in June 2025, down from ₩122.6b, one year before. However, it does have ₩57.0b in cash offsetting this, leading to net debt of about ₩49.7b.

How Strong Is EM-Tech.CO's Balance Sheet?

According to the last reported balance sheet, EM-Tech.CO had liabilities of ₩107.0b due within 12 months, and liabilities of ₩23.5b due beyond 12 months. On the other hand, it had cash of ₩57.0b and ₩18.7b worth of receivables due within a year. So it has liabilities totalling ₩54.8b more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since EM-Tech.CO has a market capitalization of ₩143.8b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But it is EM-Tech.CO'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.

View our latest analysis for EM-Tech.CO

In the last year EM-Tech.CO had a loss before interest and tax, and actually shrunk its revenue by 22%, to ₩177b. To be frank that doesn't bode well.

Caveat Emptor

Not only did EM-Tech.CO's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping ₩28b. 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. Another cause for caution is that is bled ₩17b in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. For example EM-Tech.CO has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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.