Is ICH (KOSDAQ:368600) Using Debt Sensibly?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that ICH Co., Ltd. (KOSDAQ:368600) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is ICH's Debt?

The image below, which you can click on for greater detail, shows that ICH had debt of ₩47.9b at the end of June 2025, a reduction from ₩53.0b over a year. However, because it has a cash reserve of ₩9.68b, its net debt is less, at about ₩38.3b.

How Strong Is ICH's Balance Sheet?

We can see from the most recent balance sheet that ICH had liabilities of ₩59.4b falling due within a year, and liabilities of ₩10.4b due beyond that. Offsetting these obligations, it had cash of ₩9.68b as well as receivables valued at ₩7.33b due within 12 months. So its liabilities total ₩52.8b more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the ₩32.9b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. After all, ICH would likely require a major re-capitalisation if it had to pay its creditors today. The balance sheet is clearly the area to focus on when you are analysing debt. But it is ICH's earnings that will influence how the balance sheet holds up in the future. 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 ICH

In the last year ICH had a loss before interest and tax, and actually shrunk its revenue by 9.8%, to ₩54b. We would much prefer see growth.

Caveat Emptor

Importantly, ICH had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable ₩10b at the EBIT level. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. Not least because it had negative free cash flow of ₩3.8b over the last twelve months. That means it's on the risky side of things. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for ICH (of which 2 don't sit too well with us!) you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.