Does Smart Radar System (KOSDAQ:424960) 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.' 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 Smart Radar System Inc. (KOSDAQ:424960) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Smart Radar System's Net Debt?

As you can see below, at the end of March 2025, Smart Radar System had ₩7.73b of debt, up from ₩2.70b a year ago. Click the image for more detail. But on the other hand it also has ₩18.2b in cash, leading to a ₩10.5b net cash position.

A Look At Smart Radar System's Liabilities

The latest balance sheet data shows that Smart Radar System had liabilities of ₩16.6b due within a year, and liabilities of ₩1.60b falling due after that. On the other hand, it had cash of ₩18.2b and ₩2.93b worth of receivables due within a year. So it can boast ₩2.94b more liquid assets than total liabilities.

This short term liquidity is a sign that Smart Radar System could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Smart Radar System has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Smart Radar System 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.

See our latest analysis for Smart Radar System

Over 12 months, Smart Radar System made a loss at the EBIT level, and saw its revenue drop to ₩4.8b, which is a fall of 8.2%. That's not what we would hope to see.

So How Risky Is Smart Radar System?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Smart Radar System had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩7.6b and booked a ₩7.2b accounting loss. But at least it has ₩10.5b on the balance sheet to spend on growth, near-term. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. Case in point: We've spotted 2 warning signs for Smart Radar System you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.