Hello. This is Fintag, the AI-powered corporate financial solution that helps businesses grow wisely.
When we get a medical check-up, we don't just measure height and weight. We need the numbers we can't see on the surface — blood pressure, blood sugar, cholesterol — to know our true state of health. Companies are no different.
Many CEOs judge their company's condition by revenue and their bank balance. But these two are only the company's "physique," not its "health." Revenue can rise while debt rises even faster, and there can be money in the account today that runs dry next month. In fact, profitable insolvency — collapsing from a cash crunch despite being profitable on paper — is far from rare.
Today we'll introduce three financial health indicators that even an SME leader without a dedicated finance team can check every month. The math is basic arithmetic, so by the end you'll be able to score your own company right away.
Number ① Debt Ratio — "How much is your company leaning on debt?"
The first number to check is the debt ratio. It shows how much debt the company carries relative to the money it actually owns (equity).
Debt Ratio (%) = Total Liabilities ÷ Equity × 100
For example, if a company with 500 million KRW in equity carries 700 million KRW in debt:
700M ÷ 500M × 100 = 140%
The debt ratio is 140% — meaning for every 1 won of your own money, there is 1.4 won of debt.
Generally, a debt ratio under 200% is considered manageable, and under 100% very healthy. That said, the benchmark varies by industry. Manufacturing, with heavy capital investment, naturally shows a higher ratio, while a service business with little inventory should show a lower one. So what matters more than the absolute figure is the trend. If your debt ratio is climbing quarter after quarter, year after year, that alone is a warning sign.
Number ② Interest Coverage Ratio — "Can you cover the interest with what you earn?"
If the debt ratio looks at the "size of the debt," the interest coverage ratio looks at your "ability to carry it." It shows how many times over you could pay your interest with your operating profit.
Interest Coverage Ratio (x) = Operating Profit ÷ Interest Expense
If operating profit is 120 million KRW and annual interest expense is 40 million KRW:
120M ÷ 40M = 3x
The interest coverage ratio is 3x — meaning you could pay your interest three times over with your operating profit. Reassuring.
The key is the 1x line. An interest coverage ratio below 1x means you can't even fully cover your interest with what you earn from operations. The shortfall has to be filled with more debt, which is the start of a vicious cycle where debt breeds debt. The Bank of Korea classifies a company whose interest coverage ratio stays below 1x for more than three consecutive years as a "marginal company." To be in safe territory, aim for at least 1.5x; to call yourself healthy, aim for 3x or more.
Number ③ Cash Runway — "At this pace, how many months will the account last?"
The last one is the most practical number, yet the one many CEOs overlook: cash runway. It shows how many months until your cash on hand runs out if you keep spending at the current rate.
Cash Runway (months) = Cash on Hand ÷ Average Monthly Net Cash Burn
Here, "average monthly net cash burn" is the cash that genuinely flows out each month after subtracting the cash that came in. If you have 200 million KRW in the account and it's shrinking by an average of 30 million KRW net each month:
200M ÷ 30M ≈ 6.7 months
That means cash runs dry in about 6.7 months.
While the debt ratio and interest coverage ratio look at "accounting health," cash runway is the most intuitive because it looks at your "survival window." Even with a profit on paper, if receivables come in late and fixed-cost payments pile up at the same time, the account dries up in no time. This is exactly where profitable insolvency strikes. That's why cash runway must be calculated from actual cash flow, not profit.
The three numbers at a glance
| Metric | What it shows | Formula | Healthy benchmark |
|---|---|---|---|
| Debt Ratio | Size of the debt | Total Liabilities ÷ Equity × 100 | Under 100% strong · under 200% manageable |
| Interest Coverage Ratio | Ability to carry debt | Operating Profit ÷ Interest Expense | Below 1x risky · 1.5x stable · 3x+ healthy |
| Cash Runway | Survival window | Cash on Hand ÷ Avg. Monthly Net Cash Burn | Longer is safer · under 6 months caution |
Why you must read all three together
Read in isolation, each of these tells only half the story. Read together, they paint the real picture.
- Low debt ratio but short cash runway → Little debt, but not enough cash to turn over right now. Review your short-term working capital.
- Profitable (healthy interest coverage) but short cash runway → A textbook warning sign of profitable insolvency. Address receivable collection and payment timing.
- High debt ratio and interest coverage below 1x → The most urgent alarm. It's time to restructure the debt itself.
The hard part isn't the "math" — it's "gathering the data"
The truth is, the three formulas above aren't difficult. The real challenge is gathering the numbers to plug in. Debt is scattered across loans and overdraft lines at multiple banks, cash sits across several corporate accounts, and interest expenses fall on different repayment dates. Collecting all of this by hand into a spreadsheet every month means the check-up ends up happening once a quarter — or only at year-end closing.
This is exactly what Fintag automates. It brings the assets and liabilities scattered across your banks and card companies into a single view, and forecasts your future balance based on your fragmented cash flows. On top of that, you can simply ask the AI in plain language — "Is our interest coverage ratio okay?" — and get an answer grounded in your own company's data. In effect, you get a check-up not once a quarter, but every single day.
A company's health isn't something that's fixed once and forgotten — it stays healthy only when you keep an eye on it. Start with the three numbers we introduced today. And if you'd like to make that process a little easier, Fintag will be right there with you.
📌 Check your company's three numbers with Fintag today Fintag pulls the assets and liabilities scattered across your banks and cards into a single view, and automatically calculates your debt ratio, interest coverage ratio, and cash runway. Start a 2-week free trial and get your company's financial health score today. → app.fintag.kr
Thank you. Sincerely, the Fintag Team.
