These 4 Measures Indicate That Snt DynamicsLtd (KRX:003570) Is Using Debt Reasonably Well

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, Snt Dynamics Co.,Ltd. (KRX:003570) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 Snt DynamicsLtd's Net Debt?

As you can see below, at the end of September 2025, Snt DynamicsLtd had ₩53.5b of debt, up from none a year ago. Click the image for more detail. However, its balance sheet shows it holds ₩335.7b in cash, so it actually has ₩282.3b net cash.

How Strong Is Snt DynamicsLtd's Balance Sheet?

According to the last reported balance sheet, Snt DynamicsLtd had liabilities of ₩149.0b due within 12 months, and liabilities of ₩212.0b due beyond 12 months. Offsetting these obligations, it had cash of ₩335.7b as well as receivables valued at ₩120.0b due within 12 months. So it actually has ₩94.8b more liquid assets than total liabilities.

This short term liquidity is a sign that Snt DynamicsLtd could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Snt DynamicsLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Snt DynamicsLtd

On the other hand, Snt DynamicsLtd saw its EBIT drop by 3.9% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Snt DynamicsLtd 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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Snt DynamicsLtd 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. In the last three years, Snt DynamicsLtd's free cash flow amounted to 29% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Snt DynamicsLtd has net cash of ₩282.3b, as well as more liquid assets than liabilities. So we are not troubled with Snt DynamicsLtd's debt use. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Snt DynamicsLtd (of which 1 is concerning!) you should know about.

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.