Question

what are vital signs of a companies financial and economic health how are they related to corporate branding and sustaining a company please be thorough in your answer

Answer 1

Any company’s long term goal is Sustainability and to achieve this goal a must needed strategy is corporate Branding. Branding is not only a part of business strategy; it is also comparable to an investment, which can generate high return and help to build the financial health of a company.

The vital indicators of financial health of a company and the ways by which they are related to branding are as follows:

Profitability: Gross Profit margin indicates how the company is performing with respect to its similar businesses. Likewise, Net income/Networth provides a picture of the returns that a company earns. Margin is directly related to the pricing of a product, which indicates a competitive position for the company in the particular industry. According to an estimate, a one percent increase in product price, has the capability to generate 8% more operating profit. So it is highly important to focus on increasing the revenue side rather than constantly reducing its cost.

Branding plays an important role here, as its helps to provide a price premium of a particular product which in turn helps to improve revenue and the profitability.

Firm Value: It is the most important parameter considered in case of merger, acquisition, joint ventures and strategic alliances. This is because higher value of firm leads to better opportunity.

Major portion of this firm value is often derived from several intangible assets, one of which is branding.

Shareholders’ value: From the perspective of an investor, an investment portfolio consisting of high branded companies has a capability to yield more return than that of lower brand value companies. The risk, as measured by the investors, is also estimated to be lower in case of a branded portfolio.

Financial Ratios: This is the key indicator for any company’s financial health, as the ratios give a clear picture of a company’s internal financial condition.

Liquidity ratios, which determine the ability to meet short term liabilities, have been examined to be better for strong brands. In a similar way, strong branded companies, often result in higher return on equity and its ability to pay off interest and debts.