Is TELCON RF PHARMACEUTICAL (KOSDAQ:200230) 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that TELCON RF PHARMACEUTICAL. Inc. (KOSDAQ:200230) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is TELCON RF PHARMACEUTICAL's Net Debt?

The image below, which you can click on for greater detail, shows that TELCON RF PHARMACEUTICAL had debt of ₩32.0b at the end of September 2025, a reduction from ₩41.9b over a year. However, its balance sheet shows it holds ₩40.4b in cash, so it actually has ₩8.40b net cash.

A Look At TELCON RF PHARMACEUTICAL's Liabilities

According to the last reported balance sheet, TELCON RF PHARMACEUTICAL had liabilities of ₩52.9b due within 12 months, and liabilities of ₩1.68b due beyond 12 months. Offsetting these obligations, it had cash of ₩40.4b as well as receivables valued at ₩5.53b due within 12 months. So its liabilities total ₩8.63b more than the combination of its cash and short-term receivables.

This deficit isn't so bad because TELCON RF PHARMACEUTICAL is worth ₩40.3b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. 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, TELCON RF PHARMACEUTICAL also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for TELCON RF PHARMACEUTICAL

Notably, TELCON RF PHARMACEUTICAL made a loss at the EBIT level, last year, but improved that to positive EBIT of ₩1.2b in the last twelve months. There's no doubt that we learn most about debt from the balance sheet. But it is TELCON RF PHARMACEUTICAL'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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. TELCON RF PHARMACEUTICAL may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last year, TELCON RF PHARMACEUTICAL burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

While TELCON RF PHARMACEUTICAL does have more liabilities than liquid assets, it also has net cash of ₩8.40b. So although we see some areas for improvement, we're not too worried about TELCON RF PHARMACEUTICAL's balance sheet. 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. Be aware that TELCON RF PHARMACEUTICAL is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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.