Negative Operating Cash FlowSustained negative operating and free cash flow undermines the company’s ability to self-fund capex, dividends, or debt service. If cash conversion from earnings does not improve, the firm may face liquidity strain or need external financing, weakening financial flexibility over months.
Thin Profitability MarginsLow gross and net margins mean small revenue shocks or cost inflation can quickly erode profits. Margin sensitivity constrains pricing power and limits buffer for reinvestment, making long-term profitability dependent on continued efficiency gains or higher-margin growth.
Decreased Cash ReservesDeclining cash reserves reduce the company’s short-term liquidity cushion and increase reliance on working capital management or external funding. Combined with negative cash flow, lower cash balances elevate refinancing and operational risk over the medium term.