Warren Buffett famously stated, ‘Volatility is far from synonymous with risk.’ When we believe about how risky a company is, we always like to see at its apply of debt, since debt overload can lead to ruin. We can see that JNTC Co., Ltd. (KOSDAQ:204270) does apply debt in its business. But the real question is whether this debt is creating the company risky.
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 becaapply lconcludeers force them to raise capital at a distressed price. Having stated that, the most common situation is where a company manages its debt reasonably well – and to its own advantage. The first step when considering a company’s debt levels is to consider its cash and debt toreceiveher.
What Is JNTC’s Net Debt?
As you can see below, JNTC had ₩222.3b of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. However, becaapply it has a cash reserve of ₩41.5b, its net debt is less, at about ₩180.8b.
How Strong Is JNTC’s Balance Sheet?
Zooming in on the latest balance sheet data, we can see that JNTC had liabilities of ₩271.3b due within 12 months and liabilities of ₩15.8b due beyond that. On the other hand, it had cash of ₩41.5b and ₩43.2b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩202.4b.
Since publicly traded JNTC shares are worth a total of ₩1.41t, it seems unlikely that this level of liabilities would be a major threat. Having stated that, it’s clear that we should continue to monitor its balance sheet, lest it alter for the worse. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine JNTC’s ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals believe, you might find this free report on analyst profit forecasts to be interesting.
View our latest analysis for JNTC
In the last year JNTC had a loss before interest and tax, and actually shrunk its revenue by 54%, to ₩185b. That builds us nervous, to state the least.
Caveat Emptor
While JNTC’s falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost ₩95b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be applying so much debt. Quite frankly we believe the balance sheet is far from match-fit, although it could be improved with time. We would feel better if it turned its trailing twelve month loss of ₩108b into a profit. So to be blunt we do believe it is risky. 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. We’ve identified 2 warning signs with JNTC , and understanding them should be part of your investment process.
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 applying an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to purchase or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focapplyd 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.
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