Highly Leveraged Balance SheetNegative shareholders' equity signals severe balance sheet stress, limiting access to traditional financing and increasing default or restructuring risk. Over months this constrains capital allocation, raises borrowing costs, and can force asset sales or dilution, undermining long-term stability.
Poor Cash GenerationInconsistent operating cash flows and negative free cash flow indicate the company cannot self-fund operations or investments reliably. Reliance on external financing is necessary, which poses refinancing and liquidity risks and hampers reinvestment in maintenance or growth initiatives over the medium term.
Eroding ProfitabilityDeclining revenues and persistent negative net margins erode retained capital and reduce ability to invest in efficiencies or product upgrades. Over 2–6 months this weakens competitive position, harms supplier/customer confidence, and increases the probability of operational restructuring or downsizing.