How it is worked out
It is written into the annual or quarterly report when the cash and the financing the company has secured do not cover the next year's obligations. The company page looks for it in the filings of the last two years with the SEC's full-text search.
How to read it
- It does not mean bankruptcy. It means that without new money, a sale or a restructuring, the company does not last a year.
- It is common at small biotech companies with no revenue, which live on raising capital.
- In our analyses it counts as a material negative finding and lowers the rating by one rung.
Example
A company has $40m of cash and spends $60m a year: without new financing, its report states going concern doubt.