High Financial LeverageA debt-to-equity ratio >2.8 signals elevated solvency risk and limited balance sheet flexibility. High leverage increases interest burden and vulnerability to revenue shocks, constraining capital allocation and raising the likelihood of covenant stress or refinancing needs.
Persistent Net LossesOngoing negative net income erodes retained earnings and shareholders' equity, undermining capital cushions and ROE. Persistent losses limit the firm's ability to self-fund growth or rebuild reserves, making long-term recovery dependent on sustained margin improvement or external capital.
Declining Free Cash FlowFalling free cash flow reduces capacity to reinvest in production, pay down debt, or absorb shocks. Coupled with high leverage and losses, declining FCF raises the risk the company will need external financing, diluting shareholders or increasing funding costs over the medium term.