Is Linked (KOSDAQ:193250) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. As with many other companies Linked Inc. (KOSDAQ:193250) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

What Is Linked's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Linked had debt of ₩4.31b, up from ₩1.19b in one year. But it also has ₩13.3b in cash to offset that, meaning it has ₩9.00b net cash.

A Look At Linked's Liabilities

According to the last reported balance sheet, Linked had liabilities of ₩22.1b due within 12 months, and liabilities of ₩370.5m due beyond 12 months. On the other hand, it had cash of ₩13.3b and ₩2.02b worth of receivables due within a year. So it has liabilities totalling ₩7.17b more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since Linked has a market capitalization of ₩31.0b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. While it does have liabilities worth noting, Linked also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Linked'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 Linked

Over 12 months, Linked made a loss at the EBIT level, and saw its revenue drop to ₩12b, which is a fall of 30%. That makes us nervous, to say the least.

So How Risky Is Linked?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Linked had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of ₩11b and booked a ₩22b accounting loss. However, it has net cash of ₩9.00b, so it has a bit of time before it will need more capital. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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 instance, we've identified 2 warning signs for Linked (1 is a bit unpleasant) you should be aware of.

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.