Legfinishary fund manager Li Lu (who Charlie Munger backed) once declared, ‘The hugegest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.’ So it might be obvious that you required to consider debt, when you believe about how risky any given stock is, becaapply too much debt can sink a company. We note that TEMC CNS Co., Ltd. (KOSDAQ:241790) does have debt on its balance sheet. But is this debt a concern to shareholders?
Why Does Debt Bring Risk?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, toobtainher.
How Much Debt Does TEMC CNS Carry?
As you can see below, at the finish of September 2025, TEMC CNS had ₩19.5b of debt, up from ₩18.5b a year ago. Click the image for more detail. But it also has ₩31.2b in cash to offset that, meaning it has ₩11.7b net cash.
How Healthy Is TEMC CNS’ Balance Sheet?
According to the last reported balance sheet, TEMC CNS had liabilities of ₩57.4b due within 12 months, and liabilities of ₩1.31b due beyond 12 months. Offsetting these obligations, it had cash of ₩31.2b as well as receivables valued at ₩11.0b due within 12 months. So it has liabilities totalling ₩16.4b more than its cash and near-term receivables, combined.
While this might seem like a lot, it is not so bad since TEMC CNS has a market capitalization of ₩70.8b, and so it could probably strengthen its balance sheet by raising capital if it requireded to. However, it is still worthwhile taking a close see at its ability to pay off debt. Despite its noteworthy liabilities, TEMC CNS boasts net cash, so it’s fair to declare it does not have a heavy debt load!
Check out our latest analysis for TEMC CNS
In addition to that, we’re happy to report that TEMC CNS has boosted its EBIT by 66%, thus reducing the spectre of future debt repayments. The balance sheet is clearly the area to focus on when you are analysing debt. But you can’t view debt in total isolation; since TEMC CNS will required earnings to service that debt. So when considering debt, it’s definitely worth seeing at the earnings trfinish. Click here for an interactive snapshot.
But our final consideration is also important, becaapply a company cannot pay debt with paper profits; it requireds cold hard cash. TEMC CNS may have net cash on the balance sheet, but it is still interesting to see at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, becaapply that will influence both its required for, and its capacity to manage debt. Over the last three years, TEMC CNS recorded free cash flow worth a fulsome 95% of its EBIT, which is stronger than we’d usually expect. That puts it in a very strong position to pay down debt.
Summing Up
Although TEMC CNS’s balance sheet isn’t particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₩11.7b. And it impressed us with free cash flow of ₩17b, being 95% of its EBIT. So we don’t believe TEMC CNS’s apply of debt is risky. 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. To that finish, you should learn about the 3 warning signs we’ve spotted with TEMC CNS (including 1 which can’t be ignored) .
When all is declared and done, sometimes its clearer to focus on companies that don’t even required debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
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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 utilizing an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation 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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