Bonmarche’s cash flows and ratios reveal that, in 2018, the amounts that it was spending on investments, and on dividends, exceeded the funds that it was generating from its operations. The difference was financed by reducing its cash balances. If this is to continue in 2019, the funds that it generates will have to increase, either by increasing sales revenue or by decreasing costs. In 2018 its performance for its shareholders was poor; the dividend was not even covered. However, it had a low debt ratio and good cover for its interest payments. It was having a tough time but, from the figures, it looked safe; a going concern, and its auditors thought so too. In 2019, however, everything changed, the company collapsed, and it is now in administration.
The lesson for us? Figure analysis needs augmenting with knowledge of the company’s trading environment; they are not enough on their own.