Does Park Systems (KOSDAQ:140860) Have A Healthy Balance Sheet?
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.' 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. As with many other companies Park Systems Corp. (KOSDAQ:140860) makes use of debt. But the real question is whether this debt is making the company risky.
When Is Debt A Problem?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.
What Is Park Systems's Net Debt?
The image below, which you can click on for greater detail, shows that at September 2025 Park Systems had debt of ₩63.4b, up from ₩33.9b in one year. However, its balance sheet shows it holds ₩64.2b in cash, so it actually has ₩731.8m net cash.
A Look At Park Systems' Liabilities
According to the last reported balance sheet, Park Systems had liabilities of ₩58.3b due within 12 months, and liabilities of ₩46.5b due beyond 12 months. Offsetting these obligations, it had cash of ₩64.2b as well as receivables valued at ₩37.4b due within 12 months. So its liabilities total ₩3.30b more than the combination of its cash and short-term receivables.
Having regard to Park Systems' size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₩1.62t company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Park Systems also has more cash than debt, so we're pretty confident it can manage its debt safely.
View our latest analysis for Park Systems
On top of that, Park Systems grew its EBIT by 58% over the last twelve months, and that growth will make it easier to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Park Systems's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Park Systems 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. In the last three years, Park Systems created free cash flow amounting to 5.7% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.
Summing Up
While it is always sensible to look at a company's total liabilities, it is very reassuring that Park Systems has ₩731.8m in net cash. And it impressed us with its EBIT growth of 58% over the last year. So is Park Systems's debt a risk? It doesn't seem so to us. 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 1 warning sign with Park Systems , and understanding them should be part of your investment process.
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.