Kongsberg Gruppen (OB:KOG) Could Easily Take On More Debt

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 Kongsberg Gruppen ASA (OB:KOG) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

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. If things get really bad, the lenders can take control of the business. 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.

What Is Kongsberg Gruppen's Net Debt?

As you can see below, Kongsberg Gruppen had kr2.58b of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds kr14.4b in cash, so it actually has kr11.8b net cash.

A Look At Kongsberg Gruppen's Liabilities

Zooming in on the latest balance sheet data, we can see that Kongsberg Gruppen had liabilities of kr47.9b due within 12 months and liabilities of kr5.49b due beyond that. Offsetting this, it had kr14.4b in cash and kr26.6b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr12.3b.

Of course, Kongsberg Gruppen has a titanic market capitalization of kr259.2b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Kongsberg Gruppen boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Kongsberg Gruppen

In addition to that, we're happy to report that Kongsberg Gruppen has boosted its EBIT by 31%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Kongsberg Gruppen's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Kongsberg Gruppen 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, Kongsberg Gruppen actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

We could understand if investors are concerned about Kongsberg Gruppen's liabilities, but we can be reassured by the fact it has has net cash of kr11.8b. The cherry on top was that in converted 105% of that EBIT to free cash flow, bringing in kr11b. So is Kongsberg Gruppen's debt a risk? It doesn't seem so to us. Another factor that would give us confidence in Kongsberg Gruppen would be if insiders have been buying shares: if you're conscious of that signal too, you can find out instantly by clicking this link.

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.