Here's Why ISU Petasys (KRX:007660) Can Manage Its Debt Responsibly

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that ISU Petasys Co., Ltd. (KRX:007660) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is ISU Petasys's Net Debt?

As you can see below, at the end of September 2025, ISU Petasys had ₩209.6b of debt, up from ₩196.9b a year ago. Click the image for more detail. However, it does have ₩281.2b in cash offsetting this, leading to net cash of ₩71.6b.

How Strong Is ISU Petasys' Balance Sheet?

We can see from the most recent balance sheet that ISU Petasys had liabilities of ₩361.7b falling due within a year, and liabilities of ₩89.5b due beyond that. Offsetting these obligations, it had cash of ₩281.2b as well as receivables valued at ₩226.2b due within 12 months. So it can boast ₩56.1b more liquid assets than total liabilities.

This state of affairs indicates that ISU Petasys' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₩9.92t company is short on cash, but still worth keeping an eye on the balance sheet. Simply put, the fact that ISU Petasys has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for ISU Petasys

Better yet, ISU Petasys grew its EBIT by 100% 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 ultimately the future profitability of the business will decide if ISU Petasys can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. ISU Petasys 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. Over the last three years, ISU Petasys recorded negative free cash flow, in total. Debt is far more risky for companies with unreliable free cash flow, so shareholders should be hoping that the past expenditure will produce free cash flow in the future.

Summing Up

While it is always sensible to investigate a company's debt, in this case ISU Petasys has ₩71.6b in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 100% over the last year. So we are not troubled with ISU Petasys's debt use. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for ISU Petasys (of which 1 shouldn't be ignored!) 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.