Is HUMAN TECHNOLOGY (KOSDAQ:175140) Using Too Much Debt?

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 HUMAN TECHNOLOGY Co., Ltd (KOSDAQ:175140) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is HUMAN TECHNOLOGY's Debt?

As you can see below, HUMAN TECHNOLOGY had ₩11.1b of debt at March 2025, down from ₩12.3b a year prior. On the flip side, it has ₩10.8b in cash leading to net debt of about ₩370.8m.

How Strong Is HUMAN TECHNOLOGY's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that HUMAN TECHNOLOGY had liabilities of ₩18.4b due within 12 months and liabilities of ₩1.27b due beyond that. On the other hand, it had cash of ₩10.8b and ₩6.86b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩2.00b.

Having regard to HUMAN TECHNOLOGY's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₩142.6b company is short on cash, but still worth keeping an eye on the balance sheet. But either way, HUMAN TECHNOLOGY has virtually no net debt, 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 you can't view debt in total isolation; since HUMAN TECHNOLOGY will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for HUMAN TECHNOLOGY

In the last year HUMAN TECHNOLOGY wasn't profitable at an EBIT level, but managed to grow its revenue by 24%, to ₩49b. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

While we can certainly appreciate HUMAN TECHNOLOGY's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. To be specific the EBIT loss came in at ₩6.5b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled ₩9.8b 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 HUMAN TECHNOLOGY has 4 warning signs (and 2 which are a bit unpleasant) 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.