FIBERPRO (KOSDAQ:368770) Seems To Use Debt Quite Sensibly

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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, FIBERPRO, Inc. (KOSDAQ:368770) does carry debt. 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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.

How Much Debt Does FIBERPRO Carry?

You can click the graphic below for the historical numbers, but it shows that FIBERPRO had ₩4.67b of debt in March 2025, down from ₩5.31b, one year before. However, its balance sheet shows it holds ₩12.4b in cash, so it actually has ₩7.77b net cash.

How Healthy Is FIBERPRO's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that FIBERPRO had liabilities of ₩10.5b due within 12 months and liabilities of ₩3.34b due beyond that. Offsetting these obligations, it had cash of ₩12.4b as well as receivables valued at ₩4.47b due within 12 months. So it can boast ₩3.09b more liquid assets than total liabilities.

This state of affairs indicates that FIBERPRO's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₩201.1b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, FIBERPRO boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for FIBERPRO

Better yet, FIBERPRO grew its EBIT by 120% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since FIBERPRO will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While FIBERPRO has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, FIBERPRO recorded negative free cash flow, in total. Debt is usually more expensive, and almost always more risky in the hands of a company with negative free cash flow. Shareholders ought to hope for an improvement.

Summing Up

While it is always sensible to investigate a company's debt, in this case FIBERPRO has ₩7.77b in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 120% over the last year. So we are not troubled with FIBERPRO's debt use. Over time, share prices tend to follow earnings per share, so if you're interested in FIBERPRO, you may well want to click here to check an interactive graph of its earnings per share history.

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.