Is AltonLtd (KOSDAQ:123750) Using Debt Sensibly?
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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Alton Co.,Ltd. (KOSDAQ:123750) does have debt on its balance sheet. But is this debt a concern to shareholders?
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. 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. 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 think about a company's use of debt, we first look at cash and debt together.
What Is AltonLtd's Net Debt?
As you can see below, at the end of September 2025, AltonLtd had ₩7.12b of debt, up from ₩6.00b a year ago. Click the image for more detail. However, it does have ₩14.0b in cash offsetting this, leading to net cash of ₩6.91b.
How Strong Is AltonLtd's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that AltonLtd had liabilities of ₩10.4b due within 12 months and liabilities of ₩303.7m due beyond that. Offsetting these obligations, it had cash of ₩14.0b as well as receivables valued at ₩2.03b due within 12 months. So it can boast ₩5.37b more liquid assets than total liabilities.
It's good to see that AltonLtd has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, AltonLtd boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since AltonLtd will need 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 trend.
See our latest analysis for AltonLtd
In the last year AltonLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 36%, to ₩33b. Shareholders probably have their fingers crossed that it can grow its way to profits.
So How Risky Is AltonLtd?
Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months AltonLtd lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through ₩717m of cash and made a loss of ₩4.1b. But the saving grace is the ₩6.91b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. AltonLtd's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that AltonLtd is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...
At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.
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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.