David Iben put it well when he stated, ‘Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.’ When we believe about how risky a company is, we always like to view at its utilize of debt, since debt overload can lead to ruin. Importantly, Inscobee., Inc. (KRX:006490) does carry debt. But should shareholders be worried about its utilize of debt?
What Risk Does Debt Bring?
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. If things obtain really bad, the lconcludeers can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders becautilize lconcludeers force them to raise capital at a distressed price. Of course, plenty of companies utilize debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business utilizes is to view at its cash and debt toobtainher.
What Is Inscobee’s Debt?
As you can see below, at the conclude of September 2025, Inscobee had ₩24.9b of debt, up from ₩18.3b a year ago. Click the image for more detail. On the flip side, it has ₩6.51b in cash leading to net debt of about ₩18.4b.
How Healthy Is Inscobee’s Balance Sheet?
The latest balance sheet data reveals that Inscobee had liabilities of ₩42.3b due within a year, and liabilities of ₩6.57b falling due after that. Offsetting this, it had ₩6.51b in cash and ₩22.5b in receivables that were due within 12 months. So its liabilities total ₩19.8b more than the combination of its cash and short-term receivables.
While this might seem like a lot, it is not so bad since Inscobee has a market capitalization of ₩82.7b, and so it could probably strengthen its balance sheet by raising capital if it necessaryed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk.
Check out our latest analysis for Inscobee
We utilize two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Weak interest cover of 0.13 times and a disturbingly high net debt to EBITDA ratio of 7.2 hit our confidence in Inscobee like a one-two punch to the gut. The debt burden here is substantial. One redeeming factor for Inscobee is that it turned last year’s EBIT loss into a gain of ₩390m, over the last twelve months. When analysing debt levels, the balance sheet is the obvious place to start. But you can’t view debt in total isolation; since Inscobee will necessary earnings to service that debt. So if you’re keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trconclude.
But our final consideration is also important, becautilize a company cannot pay debt with paper profits; it necessarys cold hard cash. So it is important to check how much of its earnings before interest and tax (EBIT) converts to actual free cash flow. During the last year, Inscobee burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its utilize of debt is more risky.
Our View
To be frank both Inscobee’s interest cover and its track record of converting EBIT to free cash flow build us rather uncomfortable with its debt levels. But at least its level of total liabilities is not so bad. Overall, we believe it’s fair to declare that Inscobee has enough debt that there are some real risks around the balance sheet. If everything goes well that may pay off but the downside of this debt is a greater risk of permanent losses. There’s no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we’ve identified 3 warning signs for Inscobee (2 are significant) you should be aware of.
If, after all that, you’re more interested in a quick growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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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 focutilized 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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