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華爾街日報We Think DL E&CLtd (KRX:375500) Can Stay On Top Of Its Debt
Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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, DL E&C Co.,Ltd. (KRX:375500) does carry debt. But the real question is whether this debt is making the company risky.
When Is Debt Dangerous?
Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is DL E&CLtd's Net Debt?
The image below, which you can click on for greater detail, shows that DL E&CLtd had debt of ₩1.10t at the end of September 2025, a reduction from ₩1.21t over a year. However, its balance sheet shows it holds ₩2.04t in cash, so it actually has ₩933.9b net cash.
How Strong Is DL E&CLtd's Balance Sheet?
We can see from the most recent balance sheet that DL E&CLtd had liabilities of ₩4.31t falling due within a year, and liabilities of ₩682.4b due beyond that. Offsetting this, it had ₩2.04t in cash and ₩1.97t in receivables that were due within 12 months. So its liabilities total ₩988.9b more than the combination of its cash and short-term receivables.
This deficit isn't so bad because DL E&CLtd is worth ₩1.70t, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. Despite its noteworthy liabilities, DL E&CLtd boasts net cash, so it's fair to say it does not have a heavy debt load!
Check out our latest analysis for DL E&CLtd
On top of that, DL E&CLtd grew its EBIT by 53% over the last twelve months, and that growth will make it easier to handle its debt. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine DL E&CLtd'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.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While DL E&CLtd 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. Over the most recent three years, DL E&CLtd recorded free cash flow worth 50% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Summing Up
While DL E&CLtd does have more liabilities than liquid assets, it also has net cash of ₩933.9b. And it impressed us with its EBIT growth of 53% over the last year. So we are not troubled with DL E&CLtd's debt use. 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. Case in point: We've spotted 1 warning sign for DL E&CLtd you should be aware of.
If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
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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.