disable p Four best measures of your company’s financial health | Sensus Solutions

There is no one simple way of measuring a company’s financial health and whole industries have been built around determining if a business will succeed or fail. While financial analysis is incredibly complex, there are some key indicators to measure financial health. Here are four of the most accurate:

1. Liquidity

For a company to succeed in the long term, it needs to be able to weather the financial storms of the short term. Liquidity, or simply put how much cash and convertible-to-cash assets a company has, is a good indicator of financial health. If a company does not have enough cash to deal with its short-term debt obligations, then there is a very real chance it will not survive the long term. A good way of measuring this liquidity is by using two common metrics, current ratio and quick ratio.

2. Solvency

Moving forward from the short term, a company now needs to look at how it is able to meet its debt obligations in the long-term. Like liquidity, solvency measures the value of assets against debt. A common method of measuring solvency is the debt-to-equity ratio. This is a solid indicator of how a company will fare in the long term as it provides a measure of how much a company’s operations are financed by shareholders compared to creditors.

3. Operating efficiency

An organisations management team can either ensure long-term survival or produce a very sharp decline into failure. Management is not easily quantifiable, however a company’s operating efficiency can give some indication over how well management is controlling costs. A simple analysis of the operating margin can determine profit after deducting costs of vital aspects such as production and marketing.

4. Profitability

Liquidity, solvency, and operating efficiency are good measures of financial health. However, a company’s bottom line is its bottom line. Apart from rare examples such as Amazon, if a company is not turning a profit, then it won’t succeed. A simple evaluation of the net margin is a good indicator of profit, and ultimately, a company’s sustainability.

While these factors are a good way to measure a company’s health, they are often difficult to quantify among the maelstrom of a company’s financial data. Hiring a consultancy firm which uses an effective financial platform such as BOARD can be a simple way to make sense of complicated data.

ABOUT SENSUS SOLUTIONS 

As a licensed distributer and service centre for the BOARD range of business intelligence and analytics software, Sensus Solutions has a proven track record in supporting Australian corporations. Based in Sydney, we service clients in Sydney, Brisbane and Melbourne that know the power the clever use of data and insights can do. With a focus on customer service and treating every client like an individual, we excel in sales and support in the data industry. Call us today to discover how BOARD can take your business to the next level.

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