Persistent Operating LossesLarge negative operating and net margins indicate the core business is not currently profitable and that cost structure or scale economics are insufficient. Sustained losses erode shareholder equity, reduce reinvestment capacity, and force dependence on external financing, making medium-term viability contingent on structural margin improvement.
Consistent Cash BurnConsistent negative operating and free cash flow means the company must continually access capital to fund operations. This structural cash burn raises dilution risk, constrains strategic choices, and limits ability to invest in growth or buffer against downturns unless the company establishes sustainable positive cash generation within a few quarters.
Shrinking Equity BaseA materially declining equity base reflects cumulative losses and weak retained earnings, reducing the balance sheet cushion against adverse events. Lower shareholder equity limits borrowing capacity, increases sensitivity to additional losses, and heightens the urgency for profitable operations or timely, non-dilutive funding sources.