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Here's Why Dongbang Medical (KOSDAQ:240550) Can Manage Its Debt Responsibly

Simply Wall St · 1d ago

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Dongbang Medical Co., Ltd (KOSDAQ:240550) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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 Dongbang Medical's Debt?

You can click the graphic below for the historical numbers, but it shows that Dongbang Medical had ₩37.2b of debt in September 2025, down from ₩39.6b, one year before. However, because it has a cash reserve of ₩36.9b, its net debt is less, at about ₩291.6m.

debt-equity-history-analysis
KOSDAQ:A240550 Debt to Equity History December 16th 2025

A Look At Dongbang Medical's Liabilities

Zooming in on the latest balance sheet data, we can see that Dongbang Medical had liabilities of ₩47.4b due within 12 months and liabilities of ₩17.7b due beyond that. Offsetting these obligations, it had cash of ₩36.9b as well as receivables valued at ₩22.0b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩6.25b.

Since publicly traded Dongbang Medical shares are worth a total of ₩151.9b, 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. Carrying virtually no net debt, Dongbang Medical has a very light debt load indeed.

See our latest analysis for Dongbang Medical

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.

Dongbang Medical has very little debt (net of cash), and boasts a debt to EBITDA ratio of 0.014 and EBIT of 15.1 times the interest expense. Indeed relative to its earnings its debt load seems light as a feather. On the other hand, Dongbang Medical's EBIT dived 16%, over the last year. If that rate of decline in earnings continues, the company could find itself in a tight spot. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Dongbang Medical can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. In the last three years, Dongbang Medical created free cash flow amounting to 6.9% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.

Our View

Dongbang Medical's interest cover was a real positive on this analysis, as was its net debt to EBITDA. In contrast, our confidence was undermined by its apparent struggle to grow its EBIT. We would also note that Medical Equipment industry companies like Dongbang Medical commonly do use debt without problems. Looking at all this data makes us feel a little cautious about Dongbang Medical's debt levels. While we appreciate debt can enhance returns on equity, we'd suggest that shareholders keep close watch on its debt levels, lest they increase. Over time, share prices tend to follow earnings per share, so if you're interested in Dongbang Medical, you may well want to click here to check an interactive graph of its earnings per share history.

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.