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Here's Why Tfe (KOSDAQ:425420) Can Manage Its Debt Responsibly

Simply Wall St · 5d 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 Tfe Inc. (KOSDAQ:425420) does have debt on its balance sheet. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is Tfe's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Tfe had debt of ₩34.3b, up from ₩28.3b in one year. However, it does have ₩55.4b in cash offsetting this, leading to net cash of ₩21.2b.

debt-equity-history-analysis
KOSDAQ:A425420 Debt to Equity History January 7th 2026

How Strong Is Tfe's Balance Sheet?

According to the last reported balance sheet, Tfe had liabilities of ₩21.0b due within 12 months, and liabilities of ₩38.1b due beyond 12 months. Offsetting these obligations, it had cash of ₩55.4b as well as receivables valued at ₩11.9b due within 12 months. So it can boast ₩8.20b more liquid assets than total liabilities.

This state of affairs indicates that Tfe's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₩472.2b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, Tfe boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Tfe

In addition to that, we're happy to report that Tfe has boosted its EBIT by 91%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Tfe 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Tfe 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, Tfe burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Tfe has ₩21.2b in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 91% over the last year. So we are not troubled with Tfe'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 - Tfe has 1 warning sign we think you should be aware of.

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.