NHN (KRX:181710) Seems To Use Debt Quite Sensibly

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. As with many other companies NHN Corporation (KRX:181710) makes use of debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is NHN's Debt?

The image below, which you can click on for greater detail, shows that NHN had debt of ₩225.2b at the end of September 2025, a reduction from ₩286.4b over a year. However, its balance sheet shows it holds ₩1.18t in cash, so it actually has ₩956.0b net cash.

A Look At NHN's Liabilities

According to the last reported balance sheet, NHN had liabilities of ₩1.18t due within 12 months, and liabilities of ₩516.3b due beyond 12 months. Offsetting these obligations, it had cash of ₩1.18t as well as receivables valued at ₩454.1b due within 12 months. So its liabilities total ₩63.2b more than the combination of its cash and short-term receivables.

Since publicly traded NHN shares are worth a total of ₩963.9b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, NHN boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for NHN

It was also good to see that despite losing money on the EBIT line last year, NHN turned things around in the last 12 months, delivering and EBIT of ₩87b. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if NHN can strengthen its balance sheet over time. 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. While NHN has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, NHN actually produced more free cash flow than EBIT over the last year. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that NHN has ₩956.0b in net cash. The cherry on top was that in converted 665% of that EBIT to free cash flow, bringing in ₩579b. So we don't think NHN's use of debt is risky. 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. We've identified 1 warning sign with NHN , and understanding them should be part of your investment process.

If, after all that, you're more interested in a fast 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 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.