📊 Example 2: Company B, a Telcom company. Negative Cashflow and the Need for New Equity
📌 Year: 2024
📌 Currency: IDR
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🔹 Negative Cashflow Means Finding New Funding
Company B has struggled with negative free cashflow for the last three years. In 2024, the company raised IDR 7 trillion in new equity—highlighting how businesses with ongoing cash deficits must eventually secure external funding.
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🔎 Why Did company B Need to Raise Equity?
📌 1️⃣ Continuous Negative Cashflow
• For the past three years, Company B has spent more cash than it generated, meaning it could not sustain operations with existing cashflows.
📌 2️⃣ No Other Immediate Options
• The company could have borrowed more debt, but this would increase financial risk.
• Instead, they raised IDR 7 trillion in equity, selling new shares to bring in fresh capital.
📌 3️⃣ What Happens Next?
• This dilutes existing shareholders since more shares are now in circulation.
• If Company B cannot generate positive free cashflow, they may need to raise more equity or debt in the future.
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📊 Key Takeaways
✔ Companies with long-term negative cashflow must raise new capital.
✔ Company B chose equity instead of more debt, reducing financial risk but diluting shareholders.
✔ Without improving cashflow, businesses will need continuous funding, creating a cycle of raising capital.
📌 This is why cashflow matters. A business that burns cash must constantly find new money to survive.
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👉 Go to the Next Example
👉 Go to Lesson 3
📌 Year: 2024
📌 Currency: IDR
⸻
🔹 Negative Cashflow Means Finding New Funding
Company B has struggled with negative free cashflow for the last three years. In 2024, the company raised IDR 7 trillion in new equity—highlighting how businesses with ongoing cash deficits must eventually secure external funding.
⸻
🔎 Why Did company B Need to Raise Equity?
📌 1️⃣ Continuous Negative Cashflow
• For the past three years, Company B has spent more cash than it generated, meaning it could not sustain operations with existing cashflows.
📌 2️⃣ No Other Immediate Options
• The company could have borrowed more debt, but this would increase financial risk.
• Instead, they raised IDR 7 trillion in equity, selling new shares to bring in fresh capital.
📌 3️⃣ What Happens Next?
• This dilutes existing shareholders since more shares are now in circulation.
• If Company B cannot generate positive free cashflow, they may need to raise more equity or debt in the future.
⸻
📊 Key Takeaways
✔ Companies with long-term negative cashflow must raise new capital.
✔ Company B chose equity instead of more debt, reducing financial risk but diluting shareholders.
✔ Without improving cashflow, businesses will need continuous funding, creating a cycle of raising capital.
📌 This is why cashflow matters. A business that burns cash must constantly find new money to survive.
⸻
👉 Go to the Next Example
👉 Go to Lesson 3