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華爾街日報Quality Reliability Technology (KOSDAQ:405100) Has A Pretty Healthy Balance Sheet
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Quality Reliability Technology Inc. (KOSDAQ:405100) does use debt in its business. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 Quality Reliability Technology's Net Debt?
As you can see below, Quality Reliability Technology had ₩16.6b of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds ₩23.1b in cash, so it actually has ₩6.55b net cash.
How Strong Is Quality Reliability Technology's Balance Sheet?
The latest balance sheet data shows that Quality Reliability Technology had liabilities of ₩16.4b due within a year, and liabilities of ₩29.7b falling due after that. Offsetting these obligations, it had cash of ₩23.1b as well as receivables valued at ₩9.83b due within 12 months. So its liabilities total ₩13.2b more than the combination of its cash and short-term receivables.
Of course, Quality Reliability Technology has a market capitalization of ₩207.4b, so these liabilities are probably manageable. 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, Quality Reliability Technology boasts net cash, so it's fair to say it does not have a heavy debt load!
See our latest analysis for Quality Reliability Technology
Better yet, Quality Reliability Technology grew its EBIT by 430% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. There's no doubt that we learn most about debt from the balance sheet. But it is Quality Reliability Technology's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Quality Reliability Technology 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. During the last three years, Quality Reliability Technology burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.
Summing Up
We could understand if investors are concerned about Quality Reliability Technology's liabilities, but we can be reassured by the fact it has has net cash of ₩6.55b. And it impressed us with its EBIT growth of 430% over the last year. So we don't have any problem with Quality Reliability Technology's use of debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 3 warning signs for Quality Reliability Technology (2 are a bit unpleasant!) that you should be aware of before investing here.
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.