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Does Asia Paper Manufacturing (KRX:002310) Have A Healthy Balance Sheet?

Simply Wall St · 1d ago

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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Asia Paper Manufacturing. Co., Ltd (KRX:002310) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Asia Paper Manufacturing's Debt?

The chart below, which you can click on for greater detail, shows that Asia Paper Manufacturing had ₩77.9b in debt in September 2025; about the same as the year before. But on the other hand it also has ₩170.2b in cash, leading to a ₩92.3b net cash position.

debt-equity-history-analysis
KOSE:A002310 Debt to Equity History December 15th 2025

A Look At Asia Paper Manufacturing's Liabilities

We can see from the most recent balance sheet that Asia Paper Manufacturing had liabilities of ₩161.6b falling due within a year, and liabilities of ₩39.7b due beyond that. On the other hand, it had cash of ₩170.2b and ₩123.1b worth of receivables due within a year. So it can boast ₩92.1b more liquid assets than total liabilities.

It's good to see that Asia Paper Manufacturing has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that Asia Paper Manufacturing has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Asia Paper Manufacturing

The modesty of its debt load may become crucial for Asia Paper Manufacturing if management cannot prevent a repeat of the 49% cut to EBIT over the last year. When a company sees its earnings tank, it can sometimes find its relationships with its lenders turn sour. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Asia Paper Manufacturing'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. Asia Paper Manufacturing may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, Asia Paper Manufacturing produced sturdy free cash flow equating to 52% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Asia Paper Manufacturing has ₩92.3b in net cash and a decent-looking balance sheet. So we are not troubled with Asia Paper Manufacturing'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. For example, we've discovered 3 warning signs for Asia Paper Manufacturing (1 doesn't sit too well with us!) that you should be aware of before investing here.

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.