Ratio Discussion

It has been really interesting to look at BrainChip's ratios for 2021–2024. They make it seem like the company is still working hard to transform its technology into consistent profits, not like it is running at a steady, mature rate.

The sector where profits are the weakest is certainly the one. Every year, the nett profit margin is deeply negative, dropping to more than -120% in 2023 before rising a little in 2024. The same trend holds true for Return on Assets. These metrics don't just state "loss"; they show that a corporation spent a lot of money before making any money. For a neuromorphic AI start-up attempting to win design-ins and grow, it may be typical for a while, but it does show how important it is to build up regular revenues.

Efficiency metrics, especially Total Asset Turnover, show how young BrainChip is in its life cycle. In 2021, turnover was just 0.07. It went up to 0.17 in 2022, then down to practically zero in 2023, and then up again in 2024. That volatility makes me think that one year might be deceiving for a firm with contracts that aren't always steady and extended adoption curves.

On the other side, liquidity is quite high. The current and rapid ratios stay between 6x and 9x over the whole time. That gives BrainChip a good start, but these statistics are primarily from stock raises, not cash from operations. They speak more about how easy it is to get money than about how profitable the main company is.

The capital structure is cautious since the debt-to-equity ratio is low and the equity ratio is high. This suggests that management is minimising financial risk while the technology is being tested. Times Interest Earned is negative or very slightly positive because the expenses of interest are far lower than the losses from running the business.

The differences were substantial when I compared these outcomes to those of my classmates' companies. Student A's blog on a grocery store chain indicated that its profits were always good and its assets turned over more than once. Student B wrote an article on a utilities company that spoke about comfortable interest cover and low leverage. The numbers for my company appear "worse" on paper, but they really show a distinct economic reality: a technological start-up that does a lot of research and is still looking for scalability. In that environment, I can't just write off the numbers as simple underperformance.

These analogies also made me think of questions that I want to start looking into:

How fast can BrainChip transform assessment agreements into orders for a lot of products?

Is the sales cycle becoming shorter, or is it still lengthy and unclear?

Will margins rise quickly enough to support long-term RNOA as sales grows?

How much of the liquidity buffer should be utilised for research and development (R&D) as opposed to customer service and marketing?

The statistics don't illustrate how deep the pipeline is, how quickly customers accept a product, or how sticky customers are. They also don't tell me whether a rapid rise in free cash flow would come from genuine profits or just from tightening working capital.

BrainChip's ratios show that the business is still in the process of building itself up. They point out both danger and opportunity: if adoption rises and the use of operational assets increases, the same cost base might provide you a lot of operating leverage.

I want love to know what other peoples companies. Please provide a link here if you've written about the ratios of your own organisation.

Company Spreadsheet_Teagan Allitt.xlsx

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