Does Shinsung ST (KOSDAQ:416180) Have A Healthy Balance Sheet?

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 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. As with many other companies Shinsung ST Co., Ltd. (KOSDAQ:416180) makes use of 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. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Shinsung ST's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Shinsung ST had ₩30.5b of debt, an increase on ₩17.2b, over one year. However, its balance sheet shows it holds ₩53.3b in cash, so it actually has ₩22.8b net cash.

How Strong Is Shinsung ST's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Shinsung ST had liabilities of ₩43.6b due within 12 months and liabilities of ₩26.4b due beyond that. Offsetting these obligations, it had cash of ₩53.3b as well as receivables valued at ₩29.1b due within 12 months. So it can boast ₩12.5b more liquid assets than total liabilities.

This short term liquidity is a sign that Shinsung ST could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Shinsung ST has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Shinsung ST

It is just as well that Shinsung ST's load is not too heavy, because its EBIT was down 21% over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Shinsung ST 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Shinsung ST 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. In the last three years, Shinsung ST created free cash flow amounting to 7.7% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.

Summing Up

While it is always sensible to investigate a company's debt, in this case Shinsung ST has ₩22.8b in net cash and a decent-looking balance sheet. So we don't have any problem with Shinsung ST's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 1 warning sign we've spotted with Shinsung ST .

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.