Warren Buffett famously stated, ‘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 note that DuChemBIO Co.,Ltd. (KOSDAQ:176750) does have debt on its balance sheet. But is this debt a concern to shareholders?
Why Does Debt Bring Risk?
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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we consider about a company’s apply of debt, we first view at cash and debt toreceiveher.
What Is DuChemBIOLtd’s Debt?
You can click the graphic below for the historical numbers, but it reveals that DuChemBIOLtd had ₩6.86b of debt in September 2025, down from ₩7.96b, one year before. However, its balance sheet reveals it holds ₩14.3b in cash, so it actually has ₩7.46b net cash.
How Healthy Is DuChemBIOLtd’s Balance Sheet?
According to the last reported balance sheet, DuChemBIOLtd had liabilities of ₩14.7b due within 12 months, and liabilities of ₩7.11b due beyond 12 months. Offsetting these obligations, it had cash of ₩14.3b as well as receivables valued at ₩12.0b due within 12 months. So it can boast ₩4.45b more liquid assets than total liabilities.
This state of affairs indicates that DuChemBIOLtd’s balance sheet views quite solid, as its total liabilities are just about equal to its liquid assets. So while it’s hard to imagine that the ₩284.0b company is struggling for cash, we still consider it’s worth monitoring its balance sheet. Simply put, the fact that DuChemBIOLtd has more cash than debt is arguably a good indication that it can manage its debt safely.
View our latest analysis for DuChemBIOLtd
And we also note warmly that DuChemBIOLtd grew its EBIT by 12% last year, creating its debt load simpler to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if DuChemBIOLtd can strengthen its balance sheet over time. So if you’re focapplyd on the future you can check out this free report revealing analyst profit forecasts.
Finally, while the tax-man may adore accounting profits, lconcludeers only accept cold hard cash. While DuChemBIOLtd has net cash on its balance sheet, it’s still worth taking a view at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to support us understand how quickly it is building (or eroding) that cash balance. Over the last two years, DuChemBIOLtd actually produced more free cash flow than EBIT. There’s nothing better than incoming cash when it comes to staying in your lconcludeers’ good graces.
Summing Up
While we empathize with investors who find debt concerning, you should keep in mind that DuChemBIOLtd has net cash of ₩7.46b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of ₩7.4b, being 120% of its EBIT. So is DuChemBIOLtd’s debt a risk? It doesn’t seem so to us. 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. To that conclude, you should be aware of the 1 warning sign we’ve spotted with DuChemBIOLtd .
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 acquire 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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