Why might a company have negative free cash flow?

A company may experience negative free cash flow primarily due to high capital expenditures or operational losses. This means that the cash outflows for investments in assets, such as machinery, technology, or infrastructure, exceed the cash inflows from the company's operations. High capital expenditures can be a strategic choice for growth, as companies invest heavily to expand their operations or improve their facilities, which can temporarily result in negative free cash flow.

Operational losses also contribute significantly to negative free cash flow, as these losses indicate that a company is spending more to run its operations than it is generating in revenue. When a company is consistently operating at a loss, it impacts the overall cash available after accounting for all cash outflows related to the business.

In contrast, operational efficiency, low sales revenue, and high market share do not inherently lead to negative free cash flow. High operational efficiency typically means that a company is managing its resources well and converting them into cash effectively. Low sales revenue could potentially lead to operational losses, but it alone does not directly result in negative free cash flow without considering other factors. Lastly, high market share indicates a strong competitive position but does not directly correlate with cash flow movements without the context of revenue generation and cost structure.