Weak Cash GenerationPersistent negative or weak operating cash conversion and absent free cash flow create a structural funding gap. Over months, this undermines the company’s ability to self-fund growth, pay suppliers, or absorb shocks, increasing reliance on external financing or equity dilution.
Negative ProfitabilitySustained negative net margins indicate the company’s operating costs currently outpace revenue. Without durable cost reductions or margin expansion, losses will erode equity, limit reinvestment, and threaten long-term viability despite top-line growth.
Declining Asset And Equity BaseA shrinking asset and equity base reduces the firm’s capital cushion and borrowing capacity, signaling potential contraction or impairment. Over time this erodes resilience to industry cycles, constrains expansion, and may limit the company’s ability to compete or originate credit services.