Does Seojin SystemLtd (KOSDAQ:178320) Have A Healthy Balance Sheet?
Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. Importantly, Seojin System Co.,Ltd (KOSDAQ:178320) does carry debt. But the more important question is: how much risk is that debt creating?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.
What Is Seojin SystemLtd's Debt?
As you can see below, at the end of September 2025, Seojin SystemLtd had ₩1.07t of debt, up from ₩610.8b a year ago. Click the image for more detail. However, it also had ₩35.8b in cash, and so its net debt is ₩1.03t.
How Strong Is Seojin SystemLtd's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Seojin SystemLtd had liabilities of ₩1.14t due within 12 months and liabilities of ₩292.4b due beyond that. On the other hand, it had cash of ₩35.8b and ₩274.3b worth of receivables due within a year. So it has liabilities totalling ₩1.12t more than its cash and near-term receivables, combined.
This deficit is considerable relative to its market capitalization of ₩1.50t, so it does suggest shareholders should keep an eye on Seojin SystemLtd's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Seojin SystemLtd's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
View our latest analysis for Seojin SystemLtd
Over 12 months, Seojin SystemLtd made a loss at the EBIT level, and saw its revenue drop to ₩1.0t, which is a fall of 16%. That's not what we would hope to see.
Caveat Emptor
Not only did Seojin SystemLtd's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost ₩21b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled ₩394b in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - Seojin SystemLtd has 1 warning sign we think you should be aware of.
When all is said and done, sometimes its easier to focus on companies that don't even need 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 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.