Declining Net Profit MarginA falling net margin reduces retained earnings and long-term return on capital. If driven by rising SG&A, input costs, or lower selling prices, sustained margin erosion will limit free cash flow generation, constrain reinvestment and dividend capacity, and weaken competitiveness.
Rising Leverage / Higher Debt-to-equityIncreased leverage raises interest burden and refinancing risk, reducing financial flexibility. Higher debt levels make the company more sensitive to rate moves or demand slowdowns, can limit strategic options, and may force more conservative capital allocation until leverage is stabilized.
Negative Free Cash Flow From High CapexPersistent negative free cash flow driven by capex exceeding operating cash generation can deplete cash reserves and necessitate external financing. Over the medium term this pressures liquidity, constrains dividends or share buybacks, and limits ability to fund growth without raising debt or equity.