Assessment of the Future Financial Health of the Company Essay

An assessment of the long marge fiscal wellness of the firm is an main(prenominal) task for outsiders like chartered accountants, creditors, borrowers, banks, monetary institutions, ordinary and shareholders considering the extension of credit and for insiders in their formulation of strategy. History abounds with examples of firms that embarked upon properly overambitious programs and subsequently discovered that their portfolio of programs could not be payd on acceptable terms. The ending frequently was the abandonment of programs in mid stream at spacious financial and organizational cost to the company, its vendors, its employees, and/or its creditors.A necessary commencement exercise step in the evaluation of a firms financial health is the development of a comprehensive series of questions. It is possible to cipher a multitude of ratios, but unless they relate to specific questions and concerns, their usefulness give be minimal. Furthermore, unless maven starts wit h a clear understanding of the right questions, matchlesss analysis lead inevitably be determined by whatever information readily obtainable.The following represents some of the questions that seem important in assessing the future financial health of the company. The key issue is whether or not the companys goals, strategy, investment requirements and financing capabilities are in balance.1. Will the company need to raise additional finance over the next year/over the next three to five age to carry out strategic every(prenominal)y important programs? 2. What are the managements goals of the company? How does it plans to reach these goals? What investments must be made in functional capital and in plant and equipment to support the programs? 3. Will the company be a generator of excess cash, or will it be a consumer of cash? How important is its future access to finance from outsiders? 4. Does the company drop a seasonal financing need? If so how outsize is it and what will be the perception of suppliers of finance at the time of the need? 5. susceptibility the company have a cyclical financing need? If so, how large might it be and what will be the perception of suppliers of finance at the time of the need?6. Does the company have a long term need for additional finance? If so, how large is it and what will be the perceptions of suppliers of finance at the time of the need? 7. Is the company profitable? (Future positiveness is one of the keys to raise finance) 8. What is the underlying financial accounting practice? For example, are all subsidiaries consolidated? What lives have been assumed for depreciation purposes? 9. What is the trend in profitability? Is the improvement due to i. Short lived supply shortages? ii. Opportunistic changes in financial accounting? iii. Cyclical factors iv. Curtailment of strategically important expenses? 10. Is the return on equity high/low/average due toi. Its operating margins? ii. Its addition utilization? iii. I ts financing mix? 11. Is the level of profitability sustainable, given the vista for the market and for competitive and regulatory pressure? 12. Are the earnings available to corporate or are they blocked in other countries? typehttp//classof1.com/homework-help/finance-homework-help/